A second opportunity for UK residents to sort out their tax affairs
Background
In the 2009 Budget it was announced that UK residents were to be offered a further opportunity to disclose untaxed income and gains connected with the operation of offshore bank accounts. Further details of these arrangements, known as the New Disclosure Opportunity (NDO) have now emerged. In many respects they bear a striking similarity to the Offshore Disclosure Facility (ODF) that ran during 2007. HMRC intends to publicise the NDO and attract a number of offshore account holders who did not come forward under the ODF. In general terms the NDO is targeted at customers of private banks so HMRC does not anticipate the same volume of disclosures that emerged under the ODF; they do however expect higher tax yields from larger cases.
Whilst the NDO is in progress HMRC intends to continue with its programme of obtaining details of accounts held at various offshore financial institutions. HMRC has plans to seek approval from the new Tax Tribunal to force some 500 further banks with a UK presence to disclose details of UK resident customers with offshore accounts. As you may well be aware it has recently succeeded in obtaining information from banks with headquarters in Liechtenstein and Switzerland.
Who is affected?
The NDO will run from September 2009 to March 2010, and is open to offshore bank account holders who wish to take the opportunity to provide HMRC with details of previously undisclosed income or gains. In return, HMRC will charge a fixed penalty of either 10% or 20% of the tax due. This compares favourably to the maximum penalty (100%) it could pursue in normal circumstances. In broad terms the 20% penalty will apply to customers of the five UK high street banks who were targeted under the ODF and did not come forward. The 10% penalty will only be offered to customers with offshore accounts at other banks.
A separate initiative will run in parallel with the NDO offering similar settlement terms to UK residents who have undisclosed income and gains arising from UK based assets and business activities.
The details
The initiative will run from September 2009 to March 2010. It will be split into notification and disclosure phases as with the ODF, but with more time allowed for people using HMRC's on-line web-based facilities. Notifications will generate a Disclosure Reference Number (DRN) which will allow participants to complete the disclosure phase, which will involve calculation and payment of any additional tax, plus interest for late payment and the appropriate penalty. The NDO does not carry immunity from prosecution for tax offences there have been no reported prosecutions of taxpayers who came forward under the ODF. HMRC has emphasised that no further disclosure opportunities will be offered to offshore bank account holders and those with unpaid tax who decline to come forward will face penalties of 30% and upwards if HMRC has to instigate its own enquiries.
How can we help?
From what is known of the NDO at present it is not without its anomalies and is not a 'one size fits all' facility. If any clients have undisclosed offshore accounts, they must seek specialist advice immediately.
We can provide advice to secure the most suitable route for clients to limit their exposure to tax and penalties, whether inside or outside the NDO.
