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Deadline for UK’s tax disclosure facility extended

By BILL BLEVINS [email protected]

Bill Blevins is the Managing Director of Blevins Franks. He has specialised in expatriate investment and tax planning for over 35 years. He has written books and gives lectures on this subject in Southern Europe and the UK.

The deadline for the UK offshore tax “amnesty” – the New Disclosure Opportunity (NDO) – was extended by five weeks to allow more time for taxpayers to come forward.  

The announcement came just days before the registration deadline of November 30. Notifications of Intention to Disclose must now be made by January 4.

The NDO started on September 1, just weeks after 308 UK banks with overseas branches, and foreign banks with UK account holders, were ordered by the Tax Chamber of the First-tier Tribunal to supply information on offshore accounts to the tax authority. Some of these institutions claimed that the schedule was too tight and that they need more time to contact their offshore customers. HMRC’s Permanent Secretary for Tax, Dave Hartnett, commented: “We know that some bank customers will not be contacted by their banks in good time for the original deadline of November 30, so in the interests of fairness we have decided to extend our deadline by a month to January 4.

“I strongly urge anyone who has been hiding taxable assets offshore to go online and register. The NDO is voluntary but from the start of the New Year we will begin to investigate those who were eligible to use the NDO but instead buried their heads in the sand.”

The banks are required to supply offshore account details to HMRC and then inform the customers concerned that the information has been passed to the tax authority.  

HMRC should also contact the account holders, but by the end of November it had written to just over 30,000 account holders and it is believed that there could be another 100,000 to contact. At the same time, it was thought that less than 10,000 people with undeclared offshore income had so far registered for the NDO.

HMRC has also sent out letters, unnecessarily urging some people to disclose under the NDO. Tax advisers said that clients had received the letters even though the NDO did not apply to their circumstances.  

HMRC has since apologised saying that a generic letter was sent to anyone with an offshore bank account. “We apologise if the letter has reached people it doesn’t apply to,” an HMRC spokesman said. “Some checks had been done before they were sent out, but because we had such a huge number to send in such a short timescale, it was more important to get the message out, so obviously some would slip through the net.”

Some of the banks are challenging the order to force them to hand over the information on offshore account holders. This could delay HMRC obtaining all the required information by several months.

National Director, Tax Investigations at KPMG in the UK, Reg Day, warned: “The chances are that if you have funds banked offshore, the taxman knows about them… Anyone who holds an offshore account should assume that their details have been handed over even if they haven’t yet heard from their bank.”

The NDO is open to UK taxpayers who have not paid tax on interest earned from offshore bank accounts and income from other offshore assets, which includes rental income. Any UK income which has not previously been declared must also be included. All unpaid tax must be remitted plus interest. The penalty is 10 per cent, but for those HMRC wrote to during the 2007 facility and who did not disclose, (customers of Barclays, Lloyds TSB, HSBC, HBOS and RBS), the penalty is 20 per cent.

The rest of the NDO deadlines remain the same: January 31 2010 for paper disclosures and March 12 2010 for online ones. Both must include information on all unpaid tax and full payment including interest and the penalty.

Tax amnesties around the world

Other countries announced amnesties in 2009 including the US, Italy, Malta, Australia, Brazil, Argentina and Kyrgyzstan.

The US voluntary disclosure programme, which was extended by three weeks to October 15 to allow more time for tax evaders to meet the deadline, saw 14,700 people come forward to report previously undisclosed foreign bank accounts.  

This number is almost double the 7,500 announced by the Internal Revenue Service (IRS) in October and is far higher than the number of voluntary disclosures received in 2008. The amnesty followed settlement with UBS whereby the Swiss bank handed over details of 4,500 US account holders to the IRS.

Italy’s third tax amnesty in eight years is aimed at repatriating up to 300 billion euros of the 600 billion euros worth of assets held offshore, including up to about 125 billion euros held in Switzerland and 86 billion euros in Luxembourg. Taxpayers must repatriate or declare their offshore assets. Those who comply face a five per cent levy on hidden assets and must pay unpaid tax, but escape penalties or prosecution.  

Tax amnesties and voluntary disclosure programmes are being used to help governments to recoup long lost tax and to stop tax evasion forever. There are various arrangements available which can reduce your tax liability to an acceptable level, wherever you live.

Talk to an experienced financial and tax adviser like Blevins Franks to advise you on the solution offering the maximum benefit for your situation.

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