On 17 April HM Revenue & Customs announced details of a new Offshore Disclosure Facility.
As a result of successful action through the Courts, HMRC have been able to obtain details from several UK banks about offshore bank accounts held by their customers. Based on this information, they believe there has been a substantial underpayment of UK tax due by certain of those customers. Recent press speculation suggests that this underpayment runs into billions of pounds. It would require a substantial commitment of resources on the part of HMRC to collect those underpaid taxes.
HMRC has, therefore, decided to offer those affected an opportunity to disclose the previously undisclosed income and pay the outstanding tax due under the newly announced Offshore Disclosure Facility, also referred to as the “offshore amnesty”.
The advantage of using this offshore amnesty is that taxpayers will suffer a maximum financial penalty of 10% of the unpaid tax on that income. Interest on the unpaid tax will also be due. Whilst HMRC are not guaranteeing that a taxpayer will not be investigated and the possibility of criminal prosecution also remains, those taxpayers taking advantage of the amnesty and paying the tax due in full, should find they are in a more advantageous position than would otherwise have been the case. Penalties at 10% are significantly lower than would normally apply to this type of disclosure.
Taxpayers wishing to benefit from the amnesty must notify HMRC of their intention to disclose by 22 June 2007. Full disclosure of all undeclared tax liabilities (not just those concerned with an offshore account) and settlement of the outstanding tax liability together with interest and penalties must then be made by 26 November 2007.
For those taxpayers failing to take advantage of this opportunity, a subsequent discovery and investigation by HMRC is likely to give rise to penalties of at least 30%. It must also carry with it an increased risk of prosecution as HMRC will regard the tax evasion as clearly deliberate.
HMRC have stated that taxpayers making disclosures of undeclared tax liabilities on income arising from onshore accounts may also benefit from the amnesty arrangements.
If you would like to discuss any aspect of the Offshore Disclosure Facility or require further information or advice on it, please contact Gwen Souter or Patricia Ritchie.
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