'Last chance' for offshore account holders
UK taxpayers with overseas bank accounts who come clean on their offshore income, gains and unpaid liabilities will face smaller cash penalties than those who keep quiet.
Announcing the terms of its new disclosure opportunity, Her Majesty's Revenue & Customs said affected taxpayers have until November 30th 2009 to notify their intention to disclose.
If disclosures of their offshore income together with the unpaid liabilities are settled by March of next year, then most will likely face a penalty of between 10 and 20 per cent.
Also under the scheme, seen as a final window before HMRC clamps down on offshore account holders, charges will be wavered for liabilities of less than £1000.
The Chartered Institute of Taxation welcomed the tax 'amnesty', which follows the initial one in 2007, credited for returning HMRC an impressive £189,000 per case.
Gary Ashford, chairman of a CIOT tax committee, said the proposed penalty levels were HMRC "making this opportunity as attractive possible" for taxpayers to come forward.
Rather than facing the 35% tax take seen in current enquiries, charges will be set at 10% for taxpayers with "new" disclosures where the tax due is more than £1,000.
And for taxpayers who disclose now and who were either written to by one of the major banks or by HMRC as part of the 2007 amnesty, penalties will be set at 20%.
Since the initial amnesty, which involved only five UK banks, HMRC has contacted 260 financial institutions for information pertaining to offshore bank account holders.
"The ODF should be treated as a final chance for people to put their tax affairs in order as there is unlikely to be another tax 'amnesty,' said accountants at Smith & Williamson.
"Anyone who thinks they can avoid detection by the tax authorities should think again as HMRC will certainly be looking to prosecute those who choose to ignore this last chance.
"Moreover, HMRC's information-gathering powers mean that they will have a vast amount of detail at their fingertips so people should not expect to be able to keep below HMRC's radar."
But Sue Holmes, head of the firm's tax investigations unit, said that, despite guaranteeing taxpayers with lower penalties, the offshore disclosure facility had "one major downside".
"HMRC will not guarantee immunity from prosecution even if disclosure is made. That said, the tax authorities will only consider prosecution in very serious cases".
Taxpayers who try to "clean the slate" would have to wait for at least four months after the ODF is closed (March 12 2010) to receive agreement to the settlements made, she added.
HMRC has said it will issue acceptance letters for low-risk taxpayers within this four month period, so effectively taxpayers will have to endure uncertainty for at least a year from now.
Yet for taxpayers who ignore the amnesty but are later investigated, Ms Holmes cautioned that HMRC had not ruled out penalties of 30% and possibly 100% of the tax underpaid.
Based on the success of the 2007 amnesty, the Revenue expects to raise £500m over the next four years by inviting UK residents with offshore bank accounts to volunteer their affairs.