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In an exclusive TaxationWeb article, HM Revenue & Customs announces guidance on the New Disclosure Opportunity for foreign assets.

Introduction to the New Disclosure Opportunity (NDO)

Offshore tax evasion has become very high profile recently, receiving prominent media coverage. A number of countries are keen to take strong measures to tackle the problem and as part of the action being taken in the UK, HM Revenue & Customs (HMRC) have announced a New Disclosure Opportunity (NDO). While recognising that tax evasion is against the law, the NDO gives people, who have not been paying the tax, and duties due in relation to accounts or assets held offshore, a last opportunity to come clean and put their affairs in order at a favourable penalty rate. There will not be another one of its kind.

Important Dates

The NDO will start on 1 September and follows on from a similar scheme that proved to be very successful in 2007. The whole procedure is quite straightforward. Customers will be able to contact HMRC on paper, 'phone or via a dedicated area of the website. Anyone who feels they are involved must first notify HMRC of their intent to disclose – you cannot disclose without making a notification, but this is straightforward and you will not need all of your Offshore account details at that point. All you will need are some basic details such as name, DOB, Address, etc. You can notify between the 1 September and 30 November by paper/'phone and from October until 30 November online. After you have notified you can disclose. If you want to disclose on paper, you have until 31 January 2010. If you want to disclose online then you have longer – until 12th March 2010. You cannot disclose by telephone.

Penalties

People who make a complete and accurate disclosure will still have to pay a 10% penalty, but are likely to avoid any prosecution. There will be a higher penalty of 20% for those who have already received a letter from HMRC encouraging them to come forward during the first disclosure period in 2007. Those who still choose not to take this opportunity and are later found to have not paid their tax will face a higher penalty, of at least 30% and up to 100%. They also risk having their names published or being criminally prosecuted.

Why it’s needed

In this current economic climate there are increased demands on the time and services of individuals and businesses, but many of them still make sure they pay the right amount of tax at the right time. So it is even more important that HMRC provides support and assistance to this majority by making sure that everyone is paying their fair share. After all, those who do not pay their tax are not only placing an unfair burden on the honest majority, but are also depriving the public services of vital funding. That is why HMRC needs to look at a range of measures to recoup unpaid funds and, as importantly, to ensure that the right amount is paid in the future. In the Budget, the Chancellor announced a number of targeted measures to stop those who abuse the system and HMRC have put a lot of new resources into making sure they tackle this problem. NDO is part of this work. They’re already getting details of offshore accounts and structures from banks, building societies and other financial institutions and will be using that information to contact those people who should have disclosed but choose not to.

Now is the time for anyone who is in doubt whether they have paid their taxes, whether on interest or on money that has gone into their account to contact HMRC, their tax agent or accountant and start to sort out their affairs. Take the opportunity to settle at a favourable penalty rate.

A podcast, is now available free for download from the HMRC website featuring the Permanent Secretary for Tax, Dave Hartnett discussing how the New Disclosure Opportunity will work. HMRC Podcasts.

See also TaxationWeb Editor's 'Take' on HMRC's New Disclosure Opportunity