By DAVID FRANKS firstname.lastname@example.org
David Franks is an accomplished and experienced practitioner in both UK and overseas taxation. He lectures widely on taxation issues, in particular in relation to investment planning. David holds the Investment Management Certificate and is the Chief Executive and Finance Director of the Blevins Franks Group.
The UK tax authority, HM Revenue & Customs (HMRC), has finally confirmed details of its New Disclosure Opportunity (NDO) – a second so-called tax ‘amnesty’ – to urge those with undeclared offshore income to wipe the slate clean. HMRC has declared the NDO as the final opportunity to disclose and benefit from a reduced penalty rate. It is issuing notices to over 250 banks asking for details of offshore bank accounts. Anyone with a UK address and an offshore account could come under scrutiny and should review their finances now to make sure all is correctly declared and, if not, use this opportunity before the taxman tracks them down.
Notification of the intention to disclose must be made by November 30 2009, with full disclosure and payment made by March 12 2010 (see schedule and details below).
Anyone owing tax in the UK must declare unpaid tax linked to offshore accounts and other offshore assets, which HMRC describe as “any possession or property available to meet debts”, e.g. bonds or other financial products, land/property, business interests, yachts, vehicles and so on. It also covers rental income from overseas property, capital gains, undeclared business takings and employment income that was not declared or under-declared in the UK. Details of any unpaid tax arising in the UK should also be included.
‘Offshore’ includes financial centres like the Channel Islands, the Isle of Man, the Republic of Ireland, as well as countries such as Portugal.
Key facts of the NDO:
• Penalties are fixed at 10 or 20 per cent. To qualify for these reduced rates, complete and accurate disclosure must be made. Anyone who does not take this opportunity and is subsequently found to have undeclared tax liabilities will face penalties between 30% and 100% and possible criminal prosecution.
• The 10 per cent penalty applies to all UK taxpayers who were not written to under the 2007 Offshore Disclosure Facility (ODF), namely clients of Barclays, Lloyds TSB, HSBC, HBOS and Royal Bank of Scotland from which HMRC obtained names and addresses of customers with offshore accounts.
• Account holders who were written to under the 2007 ODF but chose not to disclose can do so under the NDO – but will be charged an increased penalty of 20 per cent.
• There are two main stages of the NDO – notification and disclosure. You must first notify HMRC of the intention to disclose and then make a full disclosure before the deadline dates.
• Once you have notified HMRC of the intention to disclose, you will receive a Disclosure Reference Number (DRN) which should be used on all subsequent contact with HMRC connected with the NDO.
• When notifying you need only to provide your name, date of birth and contact address. Details of any accounts follow in the disclosure.
• Disclosure will need
– at least one unpaid tax or duty (e.g. income tax)
– summary of all tax and/or duties, interest and penalties due
– details of offshore bank accounts relevant to the disclosure and/or open at April 5 2008
– details of offshore assets held at April 5 2008
– an offer to pay
– declaration that the disclosure is complete and correct
• Disclosure cannot be accepted by HMRC until the amount has been paid and HMRC is satisfied that it is a full and complete disclosure of all undeclared sums and not just those from offshore accounts and assets.
• Where the unpaid tax is less than £1,000 no penalty will be charged.
• It is the “last opportunity” to disclose all previously unpaid tax on income and gains and benefit from a reduced penalty.
• Anyone who fails to make a disclosure and who should have done will be “relentlessly pursued”
Financial Secretary to the Treasury, Stephen Timms said: “I would urge anyone with offshore accounts holding untaxed income or gains to take advantage of this simple and straightforward scheme. Most offshore investors already pay the tax that the law requires and it’s only fair that everyone respects the rules. Tax evasion is not a victimless crime. It deprives our public services of vital funding and places an unfair burden on the honest majority of taxpayers.”
With France and Italy also offering forms of disclosure opportunities, more European countries may follow suit. In any case, anyone using non-declaration as a means of tax mitigation should rethink their tax planning and regularise their tax affairs before it is too late – with the international crackdown on offshore banks they are likely to be found out.
Irrespective of the NDO, many offshore investors are unaware that they can legitimately pay less tax than is applied by withholding taxes by putting their money into legitimate tax advantageous product structures, and could really save themselves worry by doing so.
September 1 to November 30 2009
Paper notification of intention to disclose, to include name, date of birth and contact address
October 1 to November 30 2009
Electronic notification of intention to disclose, to include name, date of birth and contact address
September 1 2009 to January 31 2010
Paper disclosures to be made to include information on all unpaid tax, interest, penalty and payment
October 1 2009 to March 12 2010
Electronic disclosures to be made to include information on all unpaid tax, interest, penalty and payment
Seek advice from an experienced tax and wealth management firm such as Blevins Franks.