Buried in one of the consultative documents that accompanied the Pre-Budget Report are proposals to charge penalties of up to 200% in respect of offshore bank accounts. This is a clear message from the Government that those with undisclosed tax liabilities should consider taking advantage of either the New Disclosure Opportunity or the Liechtenstein Disclosure Facility.

Consideration to a disclosure must be given to this now as one of the deadlines for telling HMRC that you intend making a disclosure is 4 January 2010. Further details can be found here.

Barry Hallam is a senior manager at Mercer & Hole. If you would like to discuss the contents of this post with Barry you can call him on 020 7353 1597.

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HM Revenue have confirmed to the Chartered Institute of Taxation, and other members of the Compliance Reform Forum, that there will be a second Offshore Disclosure Facility, or “opportunity” as it now being referred to as, some time next year. The exact details have yet to be agreed and HMRC are enlisting the help of the CIOT and other professional bodies to make a contribution to the design of the new opportunity”

The HMRC statement on this can be found on the CIOT website. There may be a more public announcement in the Pre Budget Report.
 

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Back in July we reported that a second “Tax Amnesty” was being seriously considered by HM Revenue & Customs. Since then we have heard nothing further until a report in Accountancy Age which confirms that HMRC are still considering this but are looking for a high profile prosecution to act as deterrent but are apparently having difficulty finding one.

With a new Chief Executive, Lesley Strathie, in charge at HMRC a second amnesty might be one of her first announcements. Alternatively it might turn up in the 2008 Pre Budget Report which is now expected to be in mid November.

If you find yourself in the position of having undisclosed income (overseas or UK) it probably makes sense to approach HMRC before they come to you. You should seek professional advice on this subject as a disclosure (and the subsequent enquiry by HMRC) needs to be managed carefully and can be fraught with difficulties.

A new penalty regime is being introduced which, in some circumstances, is much tougher than previously. It is unlikely that a prompted disclosure under the new regime would incur a penalty of less than 35%. If HMRC have already written to you about an offshore account they may take the view that you have been prompted!
 

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According to the Sunday Times HM Revenue & Customs are planning another go at trying to persuade those with undeclared overseas bank accounts to come forward. This time they are not expected to be as generous as the first time and in some cases they will be tough. Dave Hartnett, the acting Chairman of HMRC is quoted as saying:

“Some people will go to jail — I have no doubt about that, for example where they have lied to us during a previous investigation. We do not tolerate that at all.”

There are no details as yet of the mechanics of the new arrangements but if you have something you think should be disclosed you should contact your professional adviser before HMRC contact you.

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Last year HM Revenue & Customs launched the Offshore Disclosure Facility to enable those with undisclosed interest from offshore bank accounts to come clean and report the omissions and pay the tax, interest and a 10% penalty.

Before the facility closed on 26 November 2007 it was being reported that the facility had not been as successful as the Revenue had hoped.

Today the Revenue are implementing the second phase of the attack on offshore account holders by issuing letter to around 5,000 account holders who did not come forward last time. This time, as well as having to pay the tax and interest the Revenue has stated that any penalty is:

“..unlikely to be less than 30%”

If you are in the position of having undisclosed income you should seek professional advice as soon as possible. Next time it could be the maximum penalty of 100% of the tax or even a criminal investigation.

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The BBC reports that HMRC is to expand its enquiries into offshore accounts beyond the High Street banks. Many people received letters this summer explaining that their bank had given details of customers with offshore accounts to HMRC and this process has led to the so-called amnesty which was set up for people to come forward before 22 June 2007.

It now appears that HMRC has turned its attention to other private banks and investment houses. If you receive a letter from your bank and/or HMRC about this and you have any reason to be concerned please contact us for further advice.

In the majority of cases there will be nothing to report because the account holder may be taxable only when funds are brought to the UK.

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