UK Offshore Amnesty Set For September Launch

by Jason Gorringe, Tax-News.com, London

15 July 2009

The UK’s forthcoming offshore bank account amnesty will commence on September 1, 2009, HM Revenue and Customs has revealed.

The New Disclosure Opportunity (NDO) was announced by Chancellor Alistair Darling at the 2009 budget as one of many measures designed to wring extra revenues from the tax system. Under the terms of the NDO the penalty for full disclosure of income connected to a hitherto undeclared offshore account will be 10% - substantially lower than would ordinarily be the case.

However, only paper filers will be able to submit a claim for amnesty from September 1. Electronic filers will have to wait another month to make a disclosure, although e-filers will have until March 12 to submit their details to HMRC, whereas the paper deadline will fall January 31 – the same day as the self-assessment deadline.

Addressing concerns that the last offshore bank account disclosure scheme, held two years ago, was poorly promoted by the government, HMRC intends to run a national advertising campaign to raise awareness of the NDO.

The 2007 Offshore Disclosure Facility (ODF) netted the government about GBP400m in additional tax, but a more ambitious revenue target of GBP2bn has been set for the 2009/10 NDO.

Very few other details of the amnesty terms have been published by HMRC, and John Cassidy, Tax Investigations Partner at PKF Accountants & business advisers, says both account holders and HMRC will benefit if this second tax amnesty is kept “short and sweet” regarding the time limit for disclosures.

According to Cassidy, the 20-year time limit applied to the 2007 campaign deterred many offshore account holders from disclosing income.

“Anecdotal evidence suggests that the 20 year time limit had a hugely negative impact on the overall amount of tax arrears that HMRC collected,” Cassidy said. “I understand that many potential users of the ODF were put off by the sheer enormity of the project. The scale of the amounts they would have had to pay, irrespective of whether they were justified, acted as a major disincentive as did the huge, perhaps impossible, task of obtaining or recreating accurate records for such a long period.”

Normally, the period for which individuals are asked to settle tax arrears is six years. However, Cassidy points out that the corollary to this is that, in most cases the rate of penalty charged on the tax paid late is likely to be higher than the 10% rate on offer through the NDO.

“If individuals only have to go back a few years, bank statements and many other source documents are still easily available plus memories haven't faded,” he added. “The amounts involved are often not as scary for the individual but HMRC still gets a lump sum payment for very little work.”

“The maximum period for the NDO should be kept short – set at ten years or less – to sweeten the offer for offshore account holders and provide a real incentive for them to come clean,” Cassidy argued. “If more individuals take part, HMRC will collect more tax arrears overall and it won’t be left with a long list of offshore account holders to investigate in detail. As this is likely to be the last tax amnesty, keeping it short and sweet should give the best result for all parties.”

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