HMRC have announced details of arrangements enabling investors with offshore accounts to disclose any income and gains not previously included in their tax returns.

HMRC have recently obtained information about holders of offshore accounts from a number of banks and have obtained similar details through the European Savings Directive. HMRC now wish to encourage investors to pay any unpaid tax and duties on such accounts, where applicable. The "Offshore Disclosure Facility" is being introduced to help taxpayers get their tax affairs up to date.

The facility is open to those who hold or have held an offshore account, either directly or indirectly, that is in any way connected to a loss of UK tax and/or duty. For a limited period taxpayers can come forward and make a full disclosure of all undeclared liabilities, not just those connected with an offshore account. They can make a personal disclosure or one on behalf of an other.

Broadly, the terms of the facility are as follows:

• Those wishing to use the facility should notify HMRC of the intention to make a disclosure by 22 June 2007.
• There will be a fixed penalty of 10% of the tax/duties underpaid.
• There will be no penalty on disclosures of untaxed amounts totalling less than £2,500.
• Certainty of treatment throughout - taxpayers will know the rules and timetables in advance.
• The taxpayer will disclose with full payment of tax, duties, interest and penalties before 26 November 2007.
• HMRC will issue a final decision on whether or not the disclosure has been accepted as soon as possible and by 30 April 2008.

The Chartered Institute of Taxation (CIOT) believes that the new arrangements are a major development in UK tax dministration. The Institute has always supported any initiative which makes it easier for people to meet their tax obligations, and it therefore supports the broad principle of the initiative which HMRC have outlined.

John Cullinane, CIOT President, said “HMRC are sending out a clear signal to those who have deliberately evaded tax on offshore accounts that this initiative offers a chance for them to come clean and bring matters up to date: if people do not take this opportunity, then they can expect to be faced with very significant penalties when HMRC commence their programme of investigating those holders of offshore accounts who have not come forward.  We do have concerns that the scope of the initiative is extremely wide and that, at the moment, there is very little guidance for those with purely onshore irregularities.  We hope that we can work with HMRC to resolve this, and the other areas of uncertainty. Our Members in practice will face some difficult issues in getting to grips with the structure of this new initiative within the short timescale which HMRC have allowed, and we will be publishing our guidance for members within the next few days. "

Links

HMRC: Offshore Accounts

HMRC: Arrangement details

Chartered Institute of Taxation

Article Added Tuesday, 17 April 2007 | 2444 Hits

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