Enter Your E-mail

David Whiscombe of BKL Tax highlights a 'special offer' for taxpayers concerning offshore funds.

Introduction 

Readers will no doubt have seen reports of an HMRC "amnesty" regarding offshore accounts.

'Special offer'

The truth (set out at https://disclosures.hmrc.gov.uk/oaics/) is that HMRC have announced a special fixed rate of penalties (10%) for all liabilities which are connected with a hitherto undisclosed offshore bank account provided they are notified of the "intention to disclose" by 22 June and the actual quantified disclosure is made and all tax interest and penalties are paid over by 26 November. The offer extends not only to tax on the interest on the accounts but also to any evaded tax that is connected with the account. Thus if, for example, the account is funded with diverted company takings leading to a loss of Corporation tax, VAT, and tax under s419, all of these taxes will also benefit from the "special offer" 10% penalty.

One aspect of the offer that has received less publicity, and one which may be of very wide application to readers (or rather - we hope - clients of readers) is its application to purely domestic irregularities. It would be manifestly unfair if a trader who had understated his profits and stashed the loot into a UK account or under the mattress were to be less favourably treated than one who had deposited it into an offshore account. Accordingly, HMRC say that "You cannot use this facility if you have not held an offshore account that has been connected with a loss of UK tax. However, as in the past, you can make a disclosure to any HMRC office. If you approach an HMRC office and then make a full disclosure with payment under the same terms as within this facility, you can expect the same treatment." (our added emphasis)

Comment 

Plainly this disclosure facility (both in respect of offshore matters and in respect of the extension to purely onshore matters) is extremely important. In respect of offshore accounts, HMRC say that once the window closes on 22 June they will target offshore accounts and will be unlikely to seek penalties of less than 30%. In respect of evasion unconnected with an offshore account the new regime to be introduced by FA 2007 will in general see penalties that are substantially higher than those we have been used to seeing in the past. So it must be in the best interests of clients to make disclosure of on- or off-shore irregularities within the next two months and advisers who fail to take reasonable steps to bring this to the attention of clients may well be exposing themselves to a professional indemnity claim.