It could be cheaper for offshore account holders to voluntarily come forward now instead of waiting for the New Disclosure Opportunity, which starts in November, according to PKF accountants and business advisors.
To use the New Disclosure Opportunity, taxpayers will have to come clean about undeclared income over the last 20 years. Often, those coming forward voluntarily are only asked to declare any tax irregularities for a shorter period, often with only their tax returns for the last 6 years being amended.
John Cassidy, Tax Investigations Partner at PKF, explains: “If your tax affairs need sorting out, do it now. By voluntarily coming forward now there is a reasonable prospect of agreeing to settle with HMRC for the tax and interest on the ‘in date’ years only (currently 2003/4 to 2007/8). In contrast, the last amnesty covered 20 years and it is thought likely that the new disclosure opportunity will too. So, before even looking at the numbers, it is clear that you could end up paying much more if you wait until the NDO starts before making a disclosure.”
“It is true that the penalty rate charged is likely to be higher than the 10% rate available under the amnesty: even so, a penalty as low as 20% should still be achievable if you come forward now. However, because the difference in the number of years involved is so stark, it is a reasonable bet that people will save money overall if they come forward now rather than waiting until the autumn, when the NDO starts.”
According to PKF, where an individual had GBP1m of clean funds deposited overseas at the start of the tax year 1989/90 and it earned interest at a steady 5%, the tax and interest charges for the ‘in date’ tax years would be GBP251,849. If they wait for the NDO, they would owe HMRC GBP954,846, a massive difference of GBP702,997.
John continues: “The main reason for the difference is the interest on the overdue tax - it adds up very quickly indeed and for the first five years, 1989/90 to 1993/94, it is more than 100% of the actual tax.”
“Obviously there are other variables to consider for each individual. But if you want to come clean on your taxes, taking expert advice before the NDO goes live will help you choose the most cost-effective method.”
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