Offshore tax penalty terms are 'unfair'

HM Revenue & Customs is being accused of giving preferential treatment to Britons who chose Liechtenstein as the offshore jurisdiction to duck their UK tax obligations.

Accountants embraced the tax amnesty between Liechtenstein officials and the department, but said the difference in penalty terms to its offshore disclosure scheme was "unfair."

Under the scheme, the New Disclosure Opportunity , UK taxpayers who have sheltered money offshore face fines as high as 20 per cent on unpaid taxes dating backing 20 years.

But under the Liechtenstein tax deal, British bank account holders can now settle tax with only a 10 per cent penalty, relating to unpaid liabilities going back only 10 years.

"It is wholly unfair that there are different rules for those with investments in Liechtenstein and those with investments in other offshore jurisdictions," said John Cassidy, tax investigations partner at PKF.

"For those with investments in Liechtenstein there is no doubt that this is a great opportunity to declare any undeclared income or gains and square matters away with HMRC once and for all so I would urge people to make use of the facility. But I also urge HMRC to align the terms of the NDO with this new amnesty."

Anecdotal evidence cited by the firm suggests that a 20-year time limit has a hugely negative impact on the overall amount of tax that HMRC can collect, as indicated by the previous amnesty, the ODF, in 2007.

"Many [taxpayers] were put off by the sheer enormity of the project; 20 years was simply seen by many as too daunting," Mr Cassidy claimed. "Today's news only provides a further disincentive for those supposed to use the NDO simply because they banked in a different place."

His comments coincide with another attack on HMRC, arising from how long its officials spend handling tax refunds, the prompt payment of which could stop small businesses going to the wall.

HMRC says delays to administering refunds were a result of security checks and more people filing online.

But the ICPA, a group of more than 600 independent accountancy practices, said its members were unimpressed with the department's excuses for the "interminable time" refunds were taking.

Group chairman Tony Margaritelli told the Mail on Sunday: "Most galling is the fact that the Revenue has been encouraging accountants to file self-assessment for clients because refunds are automated and should therefore come through within days.

"Last year the system worked reasonably smoothly, but this year payments that previously would come through in a matter of days are months overdue."