UK To Negotiate More Offshore Disclosure Facilities

by Robin Pilgrim, LawAndTax-News.com, London

15 October 2009

Dave Hartnett, the head of the UK's HM Revenue and Customs (HMRC), has revealed that further country-specific disclosure facilities will be negotiated in 2010 and later years, but PKF Accountants and business advisors warns that such jurisdictional agreements blur the issues facing individuals with undisclosed offshore accounts.

John Cassidy, tax investigations partner at PKF, said: “The current New Disclosure Opportunity (NDO) applies to offshore accounts or other assets anywhere in the world, but the principles have already been tainted by the Liechtenstein Disclosure Facility (LDF). The suggestion of yet more amnesties on a country-by-country basis not only makes matters even more complicated, but also makes it more likely that some tax evaders will wait to come clean on their UK taxes.”

The NDO was first announced in the 2009 budget in April and the notification period runs from September 1 to November 30. This scheme caps penalties at 10% in most cases, but has a recovery period going back 20 years. The LDF agreement, signed by the UK and Liechtenstein governments on August 11 alongside a broader tax and information exchange agreement, is aimed specifically at those with accounts in Liechtenstein and commenced on the same date as the NDO. The LDF also caps penalties at 10%, but has a shorter recovery period of 10 years.

Making a speech in Madrid to the International Bar Association's conference, Dave Hartnett, Permanent Secretary for Tax at HMRC, said that he expects further disclosure facilities to be agreed in the coming years.

Cassidy added: “HMRC clearly sees the LDF as a model worth pursuing with other jurisdictions which are viewed as secretive or tax havens. It seems to accept that to get details of account holders in the future, it will have to offer a tax amnesty for each country to clear the backlog of past tax evasion. I fear that some individuals might wait for a specific amnesty rather than using the more general NDO. More determined tax evaders may simply move money around the world as each jurisdiction moves into line with HMRC’s policies. In my view, this is a naive stance as HMRC will gradually build up huge swathes of data on accounts held outside the UK and people will be caught out eventually and could face far more substantial penalties and maybe criminal proceedings."

Cassidy concluded: “Waiting for further amnesties just gives HMRC time to discover your tax irregularities in more traditional ways and bring the full force of its investigative powers and penalties down on you. If you have an offshore account, no matter where it is based, using the NDO to put things right at a low cost now is highly likely to be the lowest risk and most cost-effective option in the long run.”

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