The deadline for the UK offshore tax ?amnesty? – the New Disclosure Opportunity (NDO) – has been extended by five weeks to allow more time for taxpayers to come forward. The announcement came jus
The deadline for the UK offshore tax ?amnesty? – the New Disclosure Opportunity (NDO) – has been extended by five weeks to allow more time for taxpayers to come forward. The announcement came just days before the registration deadline of 30th November. Taxpayers who wish to take advantage of the scheme now have until 4th January to notify HM Revenue & Customs (HMRC) of their intention to disclose.
The NDO started on 1st September, just weeks after 308 UK banks with overseas branches, and foreign banks with UK account holders, were ordered by the Tax Chamber of the First-tier Tribunal to supply information on offshore accounts to the tax authority. Some of these institutions claimed that the schedule was too tight and that they need more time to contact their offshore customers.
HMRC?s Permanent Secretary for Tax, Dave Hartnett, commented:
?We know that some bank customers will not be contacted by their banks in good time for the original deadline of November 30th, so in the interests of fairness we have decided to extend our deadline by a month to January 4th.
?I strongly urge anyone who has been hiding taxable assets offshore to go on line and register. The NDO is voluntary but from the start of the New Year we will begin to investigate those who were eligible to use the NDO but instead buried their heads in the sand?
“This is a great way to start the New Year – with the knowledge that your tax affairs are in order and the certainty that the penalty will be capped at 10%.”
The banks are required to supply offshore account details to HMRC and then inform the customers concerned that the information has been passed to the tax authority. HMRC should also contact the account holders, but by the end of November it had written to just over 30,000 account holders and it is believed that there could be another 100,000 to contact. At the same time it was thought that less than 10,000 people with undeclared offshore income had so far registered for the NDO.
HMRC has also sent out letters, unnecessarily urging some people to disclose under the NDO. Tax advisers said that clients had received the letters even though the NDO did not apply to their circumstances. HMRC has since apologised saying that a generic letter was sent to anyone with an offshore bank account. ?We apologise if the letter has reached people it doesn?t apply to,? an HMRC spokesman said. ?Some checks had been done before they were sent out, but because we had such a huge number to send in such a short timescale, it was more important to get the message out, so obviously some would slip through the net.?
Some of the banks are challenging the order to force them to hand over the information on offshore account holders. This could delay HMRC obtaining all the required information by several months.
National Director, Tax Investigations at KPMG in the UK, Reg Day, warned: ?The chances are that if you have funds banked offshore, the taxman knows about them. And the authorities have pledged to go after unpaid tax on those offshore assets. So it really is worth giving this ?amnesty? serious consideration.
?Over 300 UK institutions have handed over customer details to HMRC but they haven?t all yet written to those customers to tell them about it. Anyone who holds an offshore account should assume that their details have been handed over even if they haven?t yet heard from their bank?
?This really looks like the final countdown for offshore tax dodgers. Ignoring this disclosure opportunity could lead to major penalties.?
The NDO is open to UK taxpayers who have not paid tax on interest earned from offshore bank accounts and income from other offshore assets, which includes rental income. Any UK income which has not previously been declared must also be included. All unpaid tax must be remitted plus interest. The penalty is 10%, but for those HMRC wrote to during the 2007 facility and who did not disclose, (customers of Barclays, Lloyds TSB, HSBC, HBOS and RBS) the penalty is 20%.
The rest of the NDO deadlines remain the same: 31st January 2010 for paper disclosures and 12th March 2010 for online ones. Both must include information on all unpaid tax and full payment including interest and the penalty.
Tax amnesties around the world
Other countries announced amnesties in 2009 including the US, Italy, Malta, Australia, Brazil, Argentina and Kyrgyzstan.
The US voluntary disclosure programme, which was extended by three weeks to 15th October to allow more time for tax evaders to meet the deadline, saw 14,700 people come forward to report previously undisclosed foreign bank accounts. This number is almost double the 7,500 announced by the Internal Revenue Service (IRS) in October and is far higher than the number of voluntary disclosures received in 2008. The amnesty followed settlement with UBS whereby the Swiss bank handed over details of 4,500 US account holders to the IRS.
Italy?s third tax amnesty in eight years is aimed at repatriating some of the ?600 billion worth of assets held offshore. Taxpayers must repatriate or declare their offshore assets. Those who comply face a 5% levy on hidden assets and must pay unpaid tax, but escape penalties or prosecution. The government?s initial target was for ?100 billion to be repatriated but now forecasts revenue of up to ?4 billion from the amnesty.
Malta is extending the deadline for its income tax amnesty, approved by the government on 4th September, to 16th December 2009. Under the amnesty, persons settling their tax balance under the self-assessment system (from basis year 1998 onwards) will benefit from a 90% reduction of the pending interest and penalties. Those declaring debts under the old system (up to basis year 1997), will have to pay 75% of the tax balance, while the remaining 25% will be waived. In order to benefit from the initiative, taxpayers must pay the tax balance in one lump sum by 15th January 2010.
Tax amnesties and voluntary disclosure programmes are being used to help governments to recoup long lost tax and to stop tax evasion for ever. There are various arrangements available which can reduce your tax liability to an acceptable level, wherever you live. Talk to an experienced financial and tax adviser like Blevins Franks to advise you on the solution offering the maximum benefit for your situation.
By Bill Blevins, Managing Director, Blevins Franks
30th November 2009