Anyone with undeclared funds in an offshore account has a new window of opportunity to declare these to HM Revenue & Customs (HMRC).
An HMRC amnesty, called a New Disclosure Opportunity (NDO) will start in the autumn 2009 and run until March 2010. During this time, offshore account holders will be offered lower than normal penalty levels to encourage them to come forward.
The level of penalty will be publicised before the scheme opens and is likely to be lower than the level under normal rules, but higher than the 10 per cent on offer in 2007 under the Offshore Disclosure Opportunity, the previous tax amnesty.
No specific start date for the NDO has been announced, nor are there yet any specifics of the terms for those who come forward. HMRC are likely to set up a NDO section on its website later this year.
By gathering information from all financial institutions, HMRC will ultimately be able to identify people who don't come forward under the amnesty. It is likely that such individuals will face larger penalties, greater prospect of prosecution and be subject to new "naming and shaming" provisions.
According to PricewaterhouseCoopers LLP, individuals that find themselves needing to make disclosures might include family members who receive an inheritance in an offshore account with no explanation of where the funds came from, and businessmen who have diverted business profits offshore deliberately to avoid tax.
Stephen Camm, tax partner at PricewaterhouseCoopers LLP says: "Now is a critical time for anyone with undeclared funds in an offshore account or undeclared income from offshore assets, to take stock of their situation and come clean, if they are to minimise the costs and other consequences of their mistakes. There will be no more chances."
Chris Oates, tax investigations partner at Ernst & Young says: "The New Disclosure Opportunity will be the "last chance saloon" for all tax evaders to make a disclosure and settle on a financial basis with HMRC. It is an offer that should not be refused."
Hector gets tough
HMRC is seeking access to details of UK resident customers with offshore bank accounts at more than 500 UK and foreign banks and building societies. Recently published Special Commissioners' decisions, in which information notices were served on four, as yet, unnamed financial institutions show that HMRC remains determined to flush out all those with unpaid liabilities.
Mr Camm says: "Using the estimate of tax lost in these new Special Commissioners' decisions and applying it across the population of 500 or so institutions that HMRC is engaged with, it is estimated that HMRC will recover more than £2bn in unpaid tax in this second and final amnesty."
The government announced in the April 2009 Budget that HMRC will be able to publish the names of companies and individuals who have deliberately understated more than £25,000 of tax. The details published will be not only the relevant names and numbers, but also the addresses and the business sector.
Simon Wills, tax partner at PricewaterhouseCoopers LLP says: "This is a completely new departure for HMRC and the question of taxpayer confidentiality is a cornerstone of the UK tax system. HMRC is understood to be influenced by the perceived success of similar regimes in other countries and, in particular, Ireland."
Anyone needing to make a disclosure to HMRC should carefully consider whether the NDO is right for them. Whilst the NDO may offer a fixed penalty to those whose disclosure is accepted by HMRC, it is unlikely to offer any immunity from prosecution and there are no guarantees that HMRC will accept the disclosure without investigating it further. Specialist advice in approaching HMRC is essential.
Mr Camm offers people who may be considering the need to disclose the following tips:
• Don't bury your head in the sand, act promptly to avoid becoming a target for HMRC investigation.
• Gather all relevant information such as bank statements to help calculate tax and interest due.
• Make contact with an adviser who understands what type of evidence will be needed to ensure your disclosure is accepted without protracted enquiries from HMRC.
