Imminent Deadline For UK Tax Disclosure Facility

11.11.09

Please note that this article is over six months old. While Blevins Franks takes care to make sure that information is accurate on the date of publication, some content may change over time. You should not rely on the accuracy of legislation and tax information in this article; take professional advice for your circumstances.

Time is fast running out for UK tax evaders to wipe the slate clean with HM Revenue & Customs (HMRC) under the New Disclosure Opportunity (NDO). The date is imminent ? 30th November

Time is fast running out for UK tax evaders to wipe the slate clean with HM Revenue & Customs (HMRC) under the New Disclosure Opportunity (NDO). The date is imminent ? 30th November – to submit a Notification of Intention to Disclose and receive a Disclosure Reference Number, without which a disclosure will not be accepted. HMRC has warned that any tax evaders who do not take this opportunity will not get another?and that eventually they will be found out.

People making paper disclosures, which includes paying the unpaid tax, interest and penalty, must then do so by 31st January 2010. For electronic disclosures and payment the deadline is 12th March 2010.

It has been declared by HMRC as the final opportunity to take advantage of such a disclosure scheme, the carrot of which is a reduced penalty. The NDO is open to taxpayers who have not declared interest earned from offshore bank accounts and other offshore assets, including rental income from overseas properties. All income derived from UK based sources must also be disclosed.

The UK government, along with many other countries, is determined to stamp out tax evasion. Pressure is ongoing to remind people that the illegal practice is no longer tolerated and the UK authorities have made several key moves to minimise this illegal practice:-

? The NDO is not the first disclosure facility in the UK. The 2007 Offshore Disclosure Facility (ODF) gave tax evaders the opportunity to declare undisclosed offshore income and benefit from a reduced penalty of 10%. It was introduced on the back of HMRC obtaining legal notices against five high street banks – Barclays, Lloyds TSB, HSBC, HBOS and RBS ? to get information on their offshore clients.

? The success of the ODF – reaping in over ?400 million in tax ? spurred HMRC to spread its net wider with the NDO. This time round it won permission from the Tax Chamber of the First-tier Tax Tribunal to issue notices to 308 UK and overseas banks and financial institutions for details of customers with UK addresses holding non-UK bank accounts. It covered UK financial institutions with branches offshore as well as foreign banks with UK customers. Some accounts are thought to be in Switzerland.

Information on an account holder that the financial institutions will have to provide is: a) name, b) address, c) date of birth, d) opening or closing date of the account, e) account balance, f) transaction movements. If HMRC find that anyone has not been honest and complete in their disclosure details prosecution is likely to ensue.

? The UK and Switzerland amended the double tax agreement between the two countries to include the Organisation for Economic Co-operation and Development?s internationally agreed standard on transparency and information exchange, which allows exchange of information on tax matters in individual cases, where a specific and justified request has been made.

? Permanent Secretary for Tax, Dave Hartnett, has said that he wants more powers over offshore financial centres. He aims to pursue his goal for tax authorities to be able to directly access data in another country on their taxpayers? assets. Hartnett views exchange of information on request as the first step and automatic exchange of information as standard.

? HMRC announced that it would ?name and shame? tax evaders by publishing details such as name, address and amounts of individuals and businesses where ?25,000 or more in tax has been deliberately understated.

? HMRC is reportedly seeking increased powers to force businesses to reveal information on their suppliers, clients and customers who may not be paying tax.

? In a bid to draw attention to the NDO and taxpayers? legal obligations to fully report all their offshore income, HMRC is using the modern social media to reach tax evaders. On 2nd November, Hartnett appeared on YouTube for the first time to persuade those to whom it applies to come forward under the NDO and notify HMRC before the 30th November deadline.

Hartnett said ??here?s a blunt message from HM Revenue and Customs: times have changed. The taxman now has more powers and more information … If you evade tax on your offshore assets, you?ll be found out and you could be prosecuted.? He added that the possibility of imprisonment for those who did not come forward ?is not a hollow threat?.

? In August HMRC launched a podcast on its website where Hartnett warned that anyone with undeclared offshore tax liabilities faces an increased risk of prosecution if they fail to disclose during the NDO. Hartnett stresses that ?there will not be another chance? to do so.

?It has been reported that the Revenue is considering applying for increased powers, whereby it can take half an individual?s offshore wealth if they are proved to be using an offshore jurisdiction to evade tax (currently penalties cannot be higher than 100% of the unpaid tax).

Anyone who should take advantage of the NDO and hasn?t already notified HMRC of their intention to disclose must act now, before 30th November. The reduced penalty is 10% but this applies only to people who did not disclose under the ODF and who received relevant letters i.e. customers of Barclays, Lloyds TSB, HSBC, HBOS and RBS. If these people now disclose under the NDO the penalty will be 20%.

It is far better to set the record straight with HMRC before matters get worse. The warning has been made that failure to do so can incur a prison sentence. Outside the NDO, penalties will normally start at 30% and can be as high as 70% for deliberate inaccuracies and 100% for concealment. HMRC is acquiring more power and knowledge to track down tax evaders and eventually there will be nowhere to hide.

Legitimate and professional tax planning is the only way forward. Whether you are living in the UK or overseas, there are approved tax mitigation structures available which can not only lower the taxes you have to pay but position you to protect your wealth in real terms in a tax efficient manner. Consult an experienced and regulated financial adviser like Blevins Franks Financial Management to learn which structures are most suitable for your circumstances and long-term objectives.

By David Franks, Chief Executive, Blevins Franks

9th November 2009

Tax rates, scope and reliefs may change. Any statements concerning taxation are based upon our understanding of current taxation laws and practices which are subject to change. Tax information has been summarised; individuals should seek personalised advice.

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