Tax experts are predicting that the UK's latest amnesty on offshore bank accounts,
known as the New Disclosure Opportunity (NDO), will have attracted a relatively
low take-up, despite the government's warnings that there are few places to
hide for those determined to keep their money out of the clutches of the tax
man.
The deadline for individuals to notify HM Revenue and Customs (HMRC) about
previously undisclosed offshore accounts passed at midnight on January 4, meaning
those that failed to disclose now face investigations and penalties of up to
100%.
However, in spite of the prospect of financial and criminal penalties,
PricewaterhouseCoopers predicts that only in the region of 13,000 individuals will have taken the opportunity
to register under the NDO scheme - well under half the number who took advantage
of a similar amnesty in 2007.
"In 2007 around 40,000 people registered under the Offshore Disclosure
Facility and HMRC raised approximately GBP400m. We predict that around a
third of that number have come forward this time under the New Disclosure Opportunity and that HMRC is likely to collect around GBP135m," commented
Stephen Camm, tax partner at PwC.
Under the NDO, people making a complete and accurate disclosure of their untaxed
offshore liabilities between September 1, 2009 and March 12, 2010 will have
any penalty capped at 10%, or 20% if they failed to take up a written offer
of a capped penalty under HMRC’s 2007 Offshore Disclosure Facility.
Poor advertising of the NDO by HMRC has been cited by some as a reason why
there was relatively little interest in the scheme this time around. However, the more favourable
terms of a parallel offshore amnesty targeting those with financial arrangements
in Liechtenstein, known as the Liechtenstein Disclosure Facility (LDF) is thought
to be a major reason why offshore account holders have largely shunned the NDO.
John Cassidy, Tax Investigations Partner at PKF Accountants & business
advisers observed that: “Individuals registered to use the NDO will have to
come clean about undeclared income over the last 20 years. However, if the
LDF route is used it is a much shorter period of around 10 years. Because the
difference in the number of years involved is so stark, the tax – and
interest - saved can be significant.”
The LDF, the result of an agreement between the UK and Liechtenstein last summer,
also caps penalties at 10% and allows account holders to make a full disclosure
of their financial arrangements in the Principality until March 31, 2015.
It
is also still possible to register for the LDF, and those who have already registered
for the NDO can also transfer to the Liechtenstein scheme, Cassidy noted.
PKF points out that if an individual had GBP1m of clean funds deposited
overseas at the start of the tax year 1990/91 and it earned interest at a steady
5%, the tax and interest and penalty charges owed to HMRC under the NDO would
be around GBP967,000, whereas under the LDF they would be just GBP493,000
- a saving of GBP473,000. Additional savings could be made if the original
capital in the account has not been taxed or inheritance tax is outstanding.
Moreover, Cassidy remarked that it was an "absolute myth" that a Liechtenstein bank account is needed in order to benefit from the LDF.
"An interest in relevant property in Liechtenstein can be acquired now
and the benefits of the LDF obtained. There are, of course, other variables
to properly consider for each individual before determining whether the LDF
is viable but, in the right circumstances, the potential savings are significant,"
he concluded.
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