HMRC Releases Details Of New UK Offshore Amnesty

by Robert Lee, Tax-News.com, London

08 June 2009

HM Revenue and Customs (HMRC) has announced initial details of the new offshore bank account disclosure scheme, which is due to commence in the autumn of 2009.

Following a meeting with tax practitioners, HMRC has confirmed that the penalty for full disclosure under the scheme, of income connected to a hitherto undeclared offshore account, will be 10%. However, penalties could be higher for those had a previous opportunity to disclose offshore income but failed to do so. Ordinarily, penalties of at least 30% and up to 100% can be imposed on undeclared income.

The partial amnesty scheme was announced by Chancellor Alistair Darling at the last budget and will run from the autumn of 2009 until March 2010. Named the New Disclosure Opportunity (NDO), it follows a similar facility in 2007 which collected abut GBP400m in additional tax. However, the government has warned that this will be the last chance for those with unpaid tax connected to an offshore account to come forward and escape harsh penalties and possible criminal prosecution. The government expects the NDO to raise about GBP2bn in extra tax.

HMRC is currently seeking legal authority to force about 500 banks with UK customers to hand over records of their offshore customers. If successful, this will leave the department with a mountain of data to examine, but it has warned that the information obtained from the banks will enable tax inspectors to pursue offshore account holders who failed to disclose during the NDO.

The Chartered Institute of Taxation (CIOT), which is one of the professional bodies working with HMRC to ensure that the NDO runs as smoothly as possible, welcomed HMRC's clarification.

"Those people who have not declared offshore income have evaded tax and we do not condone tax evasion in any way,” said Gary Ashford, Chairman of the CIOT’s Management of Taxes Sub-Committee. "However, it makes every sense to help such people regularise their tax affairs, particularly as many will have fallen foul of the law through mistake or misunderstanding."

The CIOT hopes that this will lead to further publicity from HMRC once the scheme is up and running, giving those who could be in line for severe penalties the opportunity to disclose.

Ashford continued: "We are pleased that a number of our recommendations have been accepted, including that the flat rate penalty for those who had no previous invitation to disclose should be 10% in line with the previous Offshore Disclosure Facility and that, importantly, tax advisers will be able to file online on behalf of clients."

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