The UK?s New Disclosure Opportunity (NDO) – a second so-called tax ?amnesty? ? begins in September. HM Revenue & Customs (HMRC) has declared that it is the final opportunity to disclose previo
The UK?s New Disclosure Opportunity (NDO) – a second so-called tax ?amnesty? ? begins in September. HM Revenue & Customs (HMRC) has declared that it is the final opportunity to disclose previously undeclared offshore income and assets and benefit from a reduced penalty rate. After obtaining information from over 300 banks, the tax investigators will have plenty of ammunition to pursue those who continue to flout their laws. Anyone with a UK address and an offshore account could come under scrutiny and should review their finances now to make sure all is correctly declared and, if not, use this opportunity before the taxman tracks them down.
On 13th August the Tax Chamber of the First-tier Tribunal ordered 308 UK and foreign banks to disclose all information on offshore accounts to HMRC. Targeted banks are believed to be UK institutions with offshore branches plus foreign banks with UK customers, including several UK institutions with operations in Switzerland.
HMRC is urging everyone with unpaid tax liabilities connected to offshore accounts now or in the past to come forward and make a full disclosure during the NDO.
Notification of the intention to disclose must be made by 30th November 2009, with full disclosure and payment made by 12th March 2010 (see schedule and details below).
Anyone owing tax in the UK must declare unpaid tax linked to offshore accounts and other offshore assets, which HMRC describe as ?any possession or property available to meet debts?, e.g. bonds or other financial products, land/property, business interests, yachts, vehicles etc. It also covers rental income from overseas property, capital gains, undeclared businesses takings and employment income that was not declared or under declared in the UK. Details of any unpaid tax arising in the UK should also be included.
?Offshore? includes financial centres like the Channel Islands, the Isle of Man, the Republic of Ireland, as well as countries such as Spain, France, Portugal, Cyprus etc.
Key facts of the NDO:
* Penalties are fixed at 10% or 20%. To qualify for these reduced rates, complete and accurate disclosure must be made. Anyone who does not take this opportunity and is subsequently found to have undeclared tax liabilities will face penalties between 30% and 100% and possible criminal prosecution.
* The 10% penalty applies to all UK taxpayers who were not written to under the 2007 Offshore Disclosure Facility (ODF), namely clients of Barclays, Lloyds TSB, HSBC, HBOS and Royal Bank of Scotland from which HMRC obtained names and addresses of customers with offshore accounts.
* Account holders who were written to under the 2007 ODF but chose not to disclose can do so under the NDO – but will be charged an increased penalty of 20%.
* There are two main stages of the NDO ? notification and disclosure. You must first notify HMRC of the intention to disclose and then make a full disclosure before the deadline dates.
* Once you have notified HMRC of the intention to disclose you will receive a Disclosure Reference Number (DRN) which should be used on all subsequent contact with HMRC connected with the NDO.
* When notifying you need only to provide your name, date of birth and contact address. Details of any accounts follow in the disclosure.
* Disclosure will need to contain:
– at least one unpaid tax or duty (e.g. income tax)
– summary of all tax and/or duties, interest and penalties due
– details of offshore bank accounts relevant to the disclosure and/or open at 5th April 2008
– details of offshore assets held at 5th April 2008
– an offer to pay
– declaration that the disclosure is complete and correct
* Disclosure cannot be accepted by HMRC until the amount has been paid and HMRC is satisfied that it is a full and complete disclosure of all undeclared sums and not just those from offshore accounts and assets.
* Where the unpaid tax is less than ?1,000 no penalty will be charged.
* It is the ?last opportunity? to disclose all previously unpaid tax on income and gains and benefit from a reduced penalty.
* Anyone who fails to make a disclosure and who should have done will be ?relentlessly pursued? by HMRC.
Schedule of disclosure
1st September to 30th November 2009:
Paper notification of intention to disclose, to include name, date of birth and contact address
1st October to 30th November 2009:
Electronic notification of intention to disclose, to include name, date of birth and contact address
1st September 2009 to 31st January 2010:
Paper disclosures to be made to include information on all unpaid tax, interest, penalty and payment
1st October 2009 to 12th March 2010:
Electronic disclosures to be made to include information on all unpaid tax, interest, penalty and payment
Financial Secretary to the Treasury, Stephen Timms said: ?I would urge anyone with offshore accounts holding untaxed income or gains to take advantage of this simple and straightforward scheme. Most offshore investors already pay the tax that the law requires and it?s only fair that everyone respects the rules. Tax evasion is not a victimless crime. It deprives our public services of vital funding and places an unfair burden on the honest majority of taxpayers.?
With France and Italy also offering forms of disclosure opportunities, more European countries may follow suit. In any case, anyone using non-declaration as a means of tax mitigation should rethink their tax planning and regularise their tax affairs before it is too late – with the international crackdown on offshore banks they are likely to be found out.
Irrespective of the NDO, many offshore investors are unaware that they can legitimately pay less tax than is applied by withholding taxes by putting their money into legitimate tax advantageous product structures, and could really save themselves worry by doing so.
Seek advice from an experienced tax and wealth management firm such as Blevins Franks.
By David Franks, Chief Executive, Blevins Franks
5th August 2009