closing offshore account

[rootsnall]

I have around 25K sterling in an offshore account. The funds went in there when I was living and working overseas a number of years ago. I have been back in the UK fulltime for around 5 years and looking through my tax returns I have generally paid enough tax to cover the offshore interest under the 'untaxed interest' section of my self assesment. I may have underpaiD by a few hundred pounds a couple of times when estimating the interest in a last minute panic. I have finally got around to closing the account as its of no benefit to me. If I transfer the funds straight into my UK bank account is this likely to trigger an investigation ? Should I attempt to repay the few hundred I think I owe ? I would like to avoid an investigation if possible. I think my tax position isn't too far in the red but is quite complicated in the years when I moved back to the UK where I was resident in 2 countries at the same time and gave up trying to make things 100% correct at both ends, not sure it was possible infact. All income went on one tax return or the other.

Any help much appreciated.

JJ

[wamstax]

Given that you have £25K sitting in the account and you have been back in UK for 5 years it might be relevant to consider how much has been used out of the account and the actual interest eraned as opposed to the actual interest declared.

The side issue to this of course is that an Inspector with an open mind - yes there may be one or two left - might actually wonder if you should have been paying tax on the monies that went into the account and on hearing about the origin or "actual few hundred pounds" - this could be 200 to umpteen hundreds dare I say -might get interested.

You do not say what your line of work is or whether you are employed/director/self employed and therefore it is difficult to judge how prone to enquiry you would be by going forward cap in hand.Your comment that "I was resident in 2 countries at the same time and gave up trying to make things 100% correct at both ends" throws another potential problem into the equation.

Suffice it to say that I have found in my experience that a lot can be gained by "biting the bullit" right at the outset and making a full disclosure to HMRC to take advantage of the possible reductions in penalties for disclosure, cooperation and size & gravity.

Nearly forgot - if the ultimate tax liabilities are small enough so that the penalty that would be applied after all reductions was less than £250 you would only pay interest. Also if you happened to be non uk domiciled the problem might not be as big as first thought

You are probably best getting a specialist to look over all the papers - but he would need to have full details of your emplyment etc details and sight of all your banking accounts to start looking at the potential damage
regards
see my site if you are interested
http://www.wamstaxltd.com
or email me at bill@wamstaxltd.com if you would rather not put too much financial info on interent.

[rootsnall]

Thanks for your reply, at the pondering stage still but I may contact you directly over the phone at a later date. If I get audited there are I'm sure a lot of complications and hence I'd rather not. I have dealt with cross country tax agreements in the past with paid for help by an employer and the whole thing was totally unworkable. I just want to close down the account first without meaning I automatically trigger an investigation.

[wamstax]

I note what you say about employer paid for help but there is no guarantee that it was appropriate or adequate. I suppose your account is lying in a "tax haven" from the tenor of your enquiry and that the European directive for withholding tax will soon be hitting home.There is no guarantee that closing the account will generate an enquiry but how much better would it be to know the bottom line and get it sorted before you use the money and then when caught - even under the discovery provisions - maybe have to liquidate assets to meet the bill

[rootsnall]

Yes you are correct its money in an offshore account with the Euro tax directive witholding tax now being applied. What exactly are the "discovery provisions" ? I have been reading the IR160 leaflet about Enquiries. If I prepare revised figures ( and send a cheque including the interest calculated ) for already submitted tax returns does this automatically trigger an Enquiry and thus the penalties ? In other words what do I gain ( in addition to peace of mind ! ) by going cap in hand ? Looking back in more detail my position may be worse than feared, there are about 7 returns where I owe 100-200 pounds and more importantly in 2002 I earned some money that should of gone on my UK tax return with a tax bill of 5-8K.

[rootsnall]

Sorry I forgot, I read up on non domiciled status and it was an interpretation of this a few years ago that led to the bigger 5-8K figure being owed. But no matter how I conscrue the rules I don't think I can claim to be UK non domiciled at the time.

[wamstax]

Discovery provisions are where HMRC as it suggests discovers that a taxpayer hasn't paid the right tax for some reason (i.e. underpaid tax) then if you have been negligent they can go back up to 20 years and take action to collect the tax , interest on the tax and a mitigated penalty of up to 100% of the tax again. However in practice HMRC settle for a mitigated penalty of less than 100% depending on the extent of your disclosure (up to 20% abatement) your cooperation (up to 40% abatement) and the seriousness of your offence(s) (up to another 40%). So going cap in hand before they catch up with you can earn you greater abatements of the penalty.
AND yes if you send a cheque for the underpaid duties along with interest I would say HMRC might just be inclined to open an enquiry - especially when they find out what it's in realtion to -bank account in offshore tax haven
By the way if you are leaving the foreign interest off your tax return when it is having withholding tax levied against it I'm sure HMRC will be alive to the possibility that it's not just the interest that's the problem but what exactly went in there as well
hope this helps
regards
bill@wamstaxltd.com

[rootsnall]

Thanks for your replies. I now have all my tax returns for the past 9 nine years in some sort of order so have a better picture. Clutching at straws here but is there any chance I could be deemed non domiciled atleast until the past couple of years!? I realise I never filled in the box stating I was non domiciled in the past returns. UK born and raised, however I emigrated to Australia on a Permanent Resident visa in early 92 with the intention of staying for good, I got Australian Citizenship in 94, and lived there until 97. I came back to the UK for 2.5 years for work reasons, then back to Oz for 1.5 years upto 2001 again with the intention I was there for good. Work brought me back for 2 years to the UK again upto 2003 but then I headed over there again with my partner with the intention of staying there but while there in 2003/2004 decided my time was up and headed back to the UK for what I considered for good. The key is that the moeny I earned doing work overseas in 2002 has never been brought back to the UK. Maybe I will post in a section dealing with Residency issues.

[wamstax]

No