The application period for the UK?s second offshore tax ?amnesty? – the New Disclosure Opportunity (NDO) – has come to an end. Around 10,000 tax offenders notified the tax authority of their inte
The application period for the UK?s second offshore tax ?amnesty? – the New Disclosure Opportunity (NDO) – has come to an end. Around 10,000 tax offenders notified the tax authority of their intention to make a disclosure, with a last minute rush of 1,100 people coming forward on the final deadline day.
At its launch HM Revenue & Customs (HMRC) expected the NDO to raise ?150 million in 2009/10 and ?500 million over four years through 50,000 people owning up to unpaid tax. The UK loses an estimated ?3 billion annually through tax evasion.
Commentators have pointed out that the 10,000 response figure was disappointingly low for HMRC, but the tax authority thinks otherwise.
HMRC?s Permanent Secretary for Tax, Dave Hartnett, said: ?We?re definitely not disappointed with 10,000 registrations. It really doesn?t matter whether the response is big, small or indifferent because, if people don?t disclose, we will investigate and, if we do the investigating, there will be much bigger penalties.?
HMRC will examine details supplied by 308 banks of account holders who did not own up under the NDO. Where there is suspicion of tax evasion, account holders are likely to face an in-depth tax investigation with potential penalty of 100% and criminal prosecution. Those owing ?25,000 or more in tax can also be publicly named and shamed on HMRC?s website.
Taxpayers who didn?t step forward under the NDO may first hear that they are in the taxman?s sights when a letter from HMRC drops through their letterbox as some banks did not inform clients that their details may be passed to the tax authority.
Treasury minister, Stephen Timms said: ?Hiding money in offshore accounts to evade tax is economically and morally unacceptable. It robs public services of funding and places an unfair burden on the honest majority of taxpayers.?
Timms added: ?Some people will still be tempted, and that is why the Government will bring forward measures during 2010 to build on the significant progress made both in the UK and globally during 2009 in closing down offshore tax evasion for good.?
Those measures include requiring offshore account holders to notify HMRC if their account balances are ?25,000 or more. Anyone who fails to do so and whose tax returns are wrong will face a penalty of up to 100% of the tax for not notifying HMRC, plus up to 100% of the tax for an incorrect return ? in effect a 200% penalty!
HMRC is already trawling through the bank data to identify people who have not made disclosures and should have done so. Hartnett warned: ?Penalties could then be increased to 100% of the tax evaded ? wiping out any advantage from going offshore in the first place.“
Hartnett stressed that penalties may still be reduced for those who make a voluntary declaration, so it is well worth contacting HMRC if you have undisclosed offshore accounts. He also revealed that HMRC is examining information about offshore accounts to help the tax authority to identify intermediaries who have helped UK residents to hide money offshore.
The deadline for notification of the intention to disclose under the NDO was 4th January (extended from 30th November), with full paper disclosure and payment to be made by 31st January 2010 and full electronic disclosure and payment by 12th March 2010. Under the scheme the penalty was reduced to 10%, or 20% for those who were contacted by HMRC during the 2007 disclosure facility but did not come forward.
The UK also has a disclosure scheme with Liechtenstein which runs until 31st March 2015 and offers more favourable conditions than the NDO.
Hartnett is keen to strike a similar deal with other countries, in particular Switzerland. He said that HMRC would ?really like? to ?open up Switzerland? and that since so many governments are determined to ?crush? tax evasion through offshore accounts, he believed it will happen.
Unprecedented tax ?amnesty? for middle classes
HMRC has launched another crackdown on tax evaders, this time targeting health professionals like consultants, doctors and dentists. Later in the year taxmen will focus on other professionals such as solicitors, lawyers and accountants.
Called the ?Tax Health Plan?, health professionals have until 31st March to register their intention to make a voluntary disclosure of unpaid tax over the last 20 years. Disclosures of the unpaid tax, interest and penalty must then be made by 30th June, after which tax enforcers will home in for ?targeted investigations? aiming at medical professionals who have not come forward. The penalty is reduced to 10% under the Tax Health Plan, but those who do not put their tax affairs in order under this scheme will suffer harsher penalties, possible criminal prosecution and being ?named and shamed?.
HMRC says that it has the technology to compare returns from different companies such as banks and the NHS to ascertain if there are any discrepancies. It will also be checking that expense claims are legitimate ones.
Director of risk and intelligence at HMRC, Mike Wells, cautioned: “I therefore strongly urge any in this group who think they may have outstanding tax liabilities on their income to get in touch with HMRC and get their tax affairs in order simply and on the best available terms.
?The message is clear: contact us before we contact you.?
Anyone concerned about their tax affairs and who would like to reduce the amount of tax that they have to pay by legitimate means should talk to a tax and financial adviser like Blevins Franks for advice on a tax savings solution suited to your individual circumstances.
By Bill Blevins, Managing Director, Blevins Franks
22nd January 2010