TT98: Offshore Bank Accounts
Or slick collection method?
There has been extensive press coverage of an ‘Amnesty’ relating to tax liabilities arising from undisclosed offshore bank accounts. This refers to an initiative by HM Revenue & Customs (HMRC) called the Offshore Disclosure Facility (ODF). This has come about after HMRC successfully forced five UK banks to provide it with details of offshore bank accounts operated by UK resident individuals. However, the ODF is not in any way an Amnesty; it is an attempt by HMRC to efficiently collect back taxes, interest and penalties.
The carrot being offered…
Individuals who come forward and make a disclosure under the ODF will have the penalties chargeable limited to 10% of the under-declared tax, providing a full and honest disclosure is made. HMRC has indicated that individuals who fail to take advantage of the ODF will be charged penalties of at least 30% of any tax that it subsequently discovers to be under-declared.
If taxpayers wish to take advantage of the ODF, it is a requirement that they must notify HMRC of this intention by 22 June 2007. They must then provide HMRC with details of the under-declared income. The tax, interest and penalties must be settled by 26 November 2007. Clearly, the first deadline is fast approaching and anyone wishing to use the ODF needs to take early and urgent action.
A sting in the tail
Any disclosure under the ODF must consider the whole of a taxpayer’s affairs and should not be limited to quantifying tax under-declared on interest arising on offshore bank accounts. HMRC will want to establish the source of money deposited into offshore bank accounts and will seek to levy tax, interest and penalties if the source of the money is itself under-declared income. They have indicated that they will seek to collect under-declared tax, interest and penalties covering the period of 20 years to 5 April 2007 unless the under-declared income in periods prior to 6 April 2001 was trivial. The term ‘trivial’ has not been oficially defined, but HMRC regards it as being absolute in nature rather than relative.Talk to Barnes Roffe today