Opening the books on offshore income
HM Revenue & Customs’ (HMRC) second tax amnesty, known as the ‘new disclosure opportunity’ (NDO), will offer an ‘amnesty’ on undeclared offshore income. Taxpayers will be charged reduced penalties for previously undisclosed and unpaid tax connected to their offshore bank accounts.
The previous tax amnesty focused primarily on customers of the five largest high street banks, but everyone with unpaid taxes linked to offshore accounts or assets can take advantage of this chance to settle their liabilities on favourable terms. If you have an offshore account and/or asset, such as an overseas property or business, and an address in the UK, you should review your tax arrangements before HMRC opens an enquiry.
The NDO means that, instead of penalties of up to 100% of the tax owed, most people making a full disclosure by 12 March 2010 will pay a penalty of just 10%. A higher penalty of 20% will be charged on people who received a letter from HMRC in 2007 but failed to make a disclosure. If the tax owed is less than £1,000, HMRC will waive penalties, although interest will be charged in all cases.
If you think you need to make a disclosure, you must get a ‘disclosure reference number’ (DRN) by registering with HMRC, which you can do between 1 September 2009 (1 October if done online) and 30 November 2009. Requesting a DRN does not oblige you to make a disclosure report if you subsequently establish that you do not have any unpaid tax.
Provided it has the necessary resources, HMRC will eventually check for discrepancies between its own information and the NDO disclosure forms, or the usual tax returns.
It is time to review any offshore accounts and assets you may have and avoid being classed with real tax evaders. If you think you will have problems paying the liability in full, then you should contact us to discuss possible alternative payment arrangements as soon as possible. Whether you have complicated tax arrangements or are not sure if you have undeclared overseas income, please come and see us. Not only may this limited period for making a disclosure make it difficult for you to comply, but this is also likely to be the last amnesty of its kind.