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UK Offshore Amnesty Registration Deadline Passes

by Jason Gorringe,, London

25 June 2007

HM Revenue and Customs saw a last minute rush of offshore bank account holders attempting to register with the department ahead of last week's deadline for partial amnesty, but the tax authority will still be left to sift through hundreds of thousands of bank accounts belonging to suspected evaders who have chosen to remain anonymous.

According to the Financial Times, more than 45,000 individuals came forward in the run up to the deadline for registering for the Offshore Disclosure Facility, which passed at midnight last Thursday, representing a ten-fold increase over the last two weeks of the scheme. It is estimated that a total of 60,000 individuals came forward before the deadline.

Under the ODF, undisclosed tax liabilities will be subject to a maximum penalty of 10% of the outstanding tax (in addition to paying the total tax and interest due). Outside of the ODF, penalties of at least 30% and possibly as much as 100% can be imposed.

The figures represent a dramatic improvement to what was looking to be a failed initiative by HMRC - the FT reported earlier in the month that only about 4,300 people had notified the tax department since the scheme was announced in April - and Dave Hartnett, the Revenue’s director-general, told the paper that the department's phones had been "ringing off the hook" in the final days of the amnesty.

The amnesty is expected to net the Treasury between GBP750 million and GBP1 billion in unpaid tax, but the final number of registrations remain small compared to the total number of people suspected of holding undeclared money in offshore accounts. Before the amnesty expired, HMRC sent out 200,000 letters warning that penalties "will be much higher than under the disclosure arrangements” and tax investigators are set to begin trawling through records of about 400,000 accounts passed onto them by banks.

"It is quite amazing how few people have come forward," Adrian Huston, a former inspector of taxes and an accountant, told BBC News. "The HMRC is going to be disappointed in this response.We will see a lot of tax investigations, hundreds of thousands possibly."

People who, in HMRC’s opinion, owe in excess of GBP500,000 of unpaid tax will be dealt with by the national “Special Civil Investigations” team. The majority will be dealt with under HMRC’s “Civil Investigation of Fraud” (CIF) procedure. Those who HMRC believe owe between GBP75,000 and GBP500,000 in undisclosed tax will receive the attentions of HMRC’s Civil Investigation of Fraud teams, again using CIF procedure. Those who HMRC believes have undisclosed tax of less than GBP75,000 will be dealt with by their local tax offices, which will raise enquiries into their previous tax returns.

High profile evaders, such as celebrities, are expected to be first in HMRC's sights as it attempts to make a public example of those hiding money offshore.

Tax advisors KPMG expect these investigations to commence around the middle of July. However, in many cases, it may be some time before they are actually contacted – possibly up to five years.

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