OFFSHORE AMNESTY II
The press are reporting regularly on various countries attempts to get their citizens to come clean over offshore bank accounts and hidden activities. In Italy the tax office are investigating some 170,000 individuals and America has recently reached a settlement, against the largest bank in Switzerland, to provide details of account holders with US addresses.
Our own Government has made no secret of its dislike at the apparent lack of transparency in the banking system and the enhanced protection provided by tax havens to hide assets and cash overseas.
In 2006 and 2007 this led to notices being issued to the 5 (then) main high street banks to provide details of offshore bank accounts held by UK addressed individuals. As a result of receiving details against some 400,000 such individuals the first amnesty (Offshore Disclosure Facility or 'ODF') was announced in February 2007.
The 2007 ODF resulted in approximately 100,000 individuals being sent letters by HMRC inviting them to register and disclose the relevant details going back 20 years with a fixed penalty of 10% - of the tax. It is understood that more than 40,000 individuals submitted disclosures under the ODF resulting in tax payments totalling £400m. The costs for raising this tax came to £10million and for HMRC this was a cost-effective exercise.
In a recent case before the Special Commissioners HMRC won the right to serve notices on 300 UK and overseas banks which is expected to produce details on a further 500,000 UK addressed individuals with accounts overseas but also including the Channel Islands, British Virgin Islands and other tax havens.
Two new amnesties have been issued which are detailed below:-
| NEW DISCLOSURE OPPORTUNITY ('NDO') |
| On 28 July 2009 HMRC issued a press release which confirmed ongoing speculation that they were considering a second Offshore amnesty. The new initiative commenced on 1 September 2009. It is understood that HMRC are expecting some 50,000 disclosures with estimates of the tax receivable ranging from £500m to £2bn.
The NDO has similar features to the 2007 ODF with:- · A 10% penalty
However, any individual who received a letter under the first ODF but chose not to submit a disclosure who now comes clean under the NDO will have an increased penalty of 20%. Unfortunately, any taxpayer who was sent a letter under the first ODF and has received a follow up letter will not be able to use the NDO facility and will have to disclose in the normal way and potentially face an in-depth review of their finances. In addition, HMRC are considering using their new powers of naming and shaming tax evaders in certain circumstances.
What You Should Do Now
If you have an undisclosed interest in an offshore account or the capital in that account represents undeclared income or gains you need to act. If you do nothing, and the banks and financial institutions have given your details to HMRC you can expect an in-depth, costly and stressful investigation with hefty penalties of up to 100% of the tax involved.
First, you will need to register an intention to disclose with HMRC from 1 September to 30 November 2009. Then for tax payers disclosing in paper format the disclosures will need to be submitted between 1 September 2009 and 31 January 2010, or for electronic submissions from 1 October 2009 to 12 March 2010. Time is very short and advice should be taken as to whether or not a disclosure is required before the period for intended disclosure expires on 30 November 2009. |
| LIECHTENSTEIN DISCLOSURE FACILITY ('LDF') |
| The LDR affects you if you hold an offshore account in Liechtenstein.
On 11 August 2009 the UK and Liechtenstein governments signed a joint declaration which resulted in a press release being issued on 12 August 2009 setting out a further amnesty for UK tax payers but only with regard to income and capital gains held in bank accounts in Liechtenstein.
It is estimated that the joint declaration concerns approximately 5,000 UK individuals who hold bank accounts in Liechtenstein.
The LDF will run from 1 September 2009 until 31 March 2015.
Under this facility there is a longer period in which to make a disclosure, compared to the NDO, and it is only necessary to submit details of income or gains for the past 10 years. If at the end of the disclosure period in 2015 a UK resident holder of an account in Liechtenstein has not made a disclosure then the relevant non-compliant accounts will be closed. |
| WHAT HAPPENS IF I HAVE ACCOUNTS IN LIECHTENSTEIN & OTHER FOREIGN JURISDICTIONS? |
| If you have an account in Liechtenstein and another foreign territory you will have to submit disclosures under both the NDO and LDF without being able to take advantage of the shorter disclosure period available under the LDF. |
| CONCLUSION |
| The NDO & LDF are seen as final opportunities to disclose and receive favourable treatment in terms of any tax penalty to be charged. Government announcements have firmly emphasized the fact that there will be no third general amnesty and will be investing in a national TV advertising campaign to increase taxpayers awareness of the amnesty.
Not every case will require a disclosure. If your interest is covered by unused personal allowances, or you are not UK domiciled and have not remitted any income, profits or gains to the UK no liability would arise. Whether your case requires disclosure will depend on your individual circumstances. |
Further details should become available over the coming months but if you are unsure as to whether or not you have a potential tax liability, how you should approach the Revenue or complete the disclosure forms we will be able to assist and guide you through the procedure.
For further information on the above please contact John Salton on 020 7674 0581 or by email - johnsalton@cumberlandellis.com
Please visit our Private Client webpage for details of the full range of services we offer private clients.
