New Disclosure Opportunity ("NDO")

4 January 2010

Important Information Regarding Tax Liabilities on Offshore Assets

You need to read on if you have any offshore bank accounts, or any other  source of income connected to an offshore asset.  

You should be aware that the opportunity to register your intention to make disclosure expired on 4 January 2010.  The following is therefore provided for information purposes only.

Past experience with the 2007 tax ‘amnesty’ showed that many people had not given their accountant full details of offshore assets, believing that they were not taxable. Others knew that they owed tax but were afraid to tell their accountant for fear of the consequences.

There is nothing wrong in owning assets or bank accounts offshore, but they do need careful attention from the tax point of view as mistakes can easily be made. So, if you do have any offshore assets or income of any kind, whether or not you have told your accountant about it, now is the ideal time to review things.

Background information

On 1 September HMRC announced the New Disclosure Opportunity (“NDO”). This was an opportunity for anyone who may owe UK tax relating to offshore assets to come forward and bring their tax affairs up to date on favourable terms. It is part of an ongoing campaign by HMRC against tax evasion through the use of offshore bank accounts, and is also linked to a wider international effort by most of the G20 countries. Information exchange between countries is increasing all the time, and even “tax haven” jurisdictions are co-operating.

The result is that HMRC has already obtained details from a number of banks concerning customers who are known to have offshore accounts.  In addition, they recently obtained orders against a further 308 UK based banks requiring them to provide details of all customers who hold overseas accounts.

The NDO is a chance for people who owe tax to make a disclosure and settle on much more favourable terms than if HMRC track them down through information provided by banks.

How the NDO works

In brief, if you make a disclosure you will be expected to pay the outstanding tax, interest upon it, and a penalty of 10%.  Customers of the five High Street banks who received warning letters in connection with the previous “amnesty” (the Offshore Disclosure Facility), but who did not come forward at that time, will be subject to a higher penalty of 20%.

The discounted penalty represents very favourable terms.  People who are subsequently tracked down by HMRC will face much higher penalties – possibly as high as 70-100% of the tax owed. They are also likely to face a rigorous investigation of their business and personal financial affairs and the chance of prosecution is higher.  Although prosecution would only be applicable for the most serious of cases, from 2011 onwards taxpayers who owe more than £25,000 will also be at risk of being publicly “named and shamed” in accordance with proposals announced in this year’s budget.

To take advantage of the NDO, an initial intention to make a disclosure has to be officially notified to HMRC.  The original deadline was 30 November, however HMRC have now announced that the deadline has been pushed back to 4 January 2010.  If you do not register by then there is no further opportunity to use the NDO. A report must then be submitted no later than 31 January 2010 (electronic disclosures can be filed until 12 March 2010) and the outstanding tax, interest and 10% penalty must be paid by 12 March 2010.

When the time limit for making disclosures has passed, HMRC say that there will be no further such amnesties, and they will then invest their efforts in tracking down those who did not come forward.

What you should do

If you have any concerns at all regarding your tax affairs, whether in the UK or offshore, you need to contact Leila Sangar or Jeffrey Smith at Eacotts as a matter of urgency. It may be that there is nothing to worry about, but if something is amiss, now is the time to get it sorted out.

The NDO only covers tax relating to offshore assets, but even if a matter concerns purely UK issues, a voluntary disclosure will always substantially reduce the amount of penalty charged.

If there is a problem, leaving things to the last minute is a mistake, and could result in you missing the opportunity.

Please contact us if we can help with the preparation and filing of your financial statements.

01628 665432

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