Important Information Regarding Tax Liabilities on Offshore Assets

Background information
On 1 September HMRC announced the New Disclosure Opportunity (“NDO”). This is an opportunity for anyone who may owe UK tax relating to offshore assets to come forward and bring their tax affairs up to date on favourable terms. It is part of an ongoing campaign by HMRC against tax evasion through the use of offshore bank accounts, and is also linked to a wider international effort by most of the G20 countries. Information exchange between countries is increasing all the time, and even “tax haven” jurisdictions are co-operating.

The result is that HMRC has already obtained details from a number of banks concerning customers who are known to have offshore accounts. In addition, they recently obtained orders against a further 308 UK based banks requiring them to provide details of all customers who hold overseas accounts.

The NDO is a chance for people who owe tax to make a disclosure and settle on much more favourable terms than if HMRC track them down through information provided by banks.

How the NDO works

The full details of how the NDO works are published on HMRC’s website, www.hmrc.gov.uk , but the essentials are that if you make a disclosure you will be expected to pay the outstanding tax, interest upon it, and a penalty of 10%. Customers of the five High Street banks who received warning letters in connection with the previous “amnesty” (the Offshore Disclosure Facility), but who did not come forward at that time, will be subject to a higher penalty of 20%.

The discounted penalty represents very favourable terms. People who are subsequently tracked down by HMRC will face much higher penalties – possibly as high as 70-100% of the tax owed. They are also likely to face a rigorous investigation of their business and personal financial affairs and the chance of prosecution is higher. Although prosecution would only be applicable for the most serious of cases, from 2011 onwards taxpayers who owe more than £25,000 will also be at risk of being publicly “named and shamed” in accordance with proposals announced in this year’s budget.

To take advantage of the NDO, an initial intention to make a disclosure has to be officially notified to HMRC by 30 November. If you do not register by then there is no further opportunity to use the NDO. A report must then be submitted and the outstanding tax, interest and 10% penalty paid by 12 March 2010.

When the time limit for making disclosures has passed, HMRC say that there will be no further such amnesties, and they will then invest their efforts in tracking down those who did not come forward.

What you should do
If you have any concerns at all regarding your tax affairs, whether in the UK or offshore, please contact us as a matter of urgency. It may be that there is nothing to worry about, but if something is amiss now is the time to get it sorted out. We can review your tax affairs for you, or if appropriate we can arrange for you to have a free consultation with an independent expert.

The NDO only covers tax relating to offshore assets, but even if a matter concerns purely UK issues a voluntary disclosure will always substantially reduce the amount of penalty charged.

If there is a problem, leaving things to the last minute is a mistake, and could result in you missing the opportunity.

Conclusion
As far as we know your tax affairs are in order. 

However, the previous amnesty demonstrated that for various reasons many people had got themselves into problems with offshore bank accounts, sometimes completely unaware that there was anything wrong. For example, some had been given incorrect advice by other parties. So even if you think everything is in order, our strong recommendation is that you consult with us to make sure.

If you have any concerns at all please contact us.