Offshore bank accounts and Revenue & Customs’ new disclosure initiative
Following a ruling this month by a tax tribunal, British tax authorities will be able to get hold of the details of people in the south west who evade tax by holding their cash in offshore accounts.
The move is part of an international effort to crack down on tax evasion, and comes after an agreement between Britain and Liechtenstein which encourages British clients with secret accounts in the Alpine state to disclose billions of pounds in untaxed money or face a penalty rate of at least 30 per cent and an increased risk of criminal prosecution.
While HM Revenue & Customs can now seek information from banks, it is offering Brits the chance to settle unpaid liabilities at a lower penalty rate of 10 percent under the New Disclosure Opportunity, and south west accountants Old Mill is warning people affected to act now.
“These two developments add considerably to HMRC’s powers to help counter tax evasion,” said Bruce Lockhart, Tax Partner at Old Mill Accountancy LLP, “and those who have been evading tax by keeping their money offshore will now have to own up or risk paying some serious fines; some could even face criminal charges ”
Under the “New Disclosure Opportunity” (the original “Offshore Disclosure Opportunity” in 2007 focused on the customers of five large banks), tax payers are being given a chance to come clean and to avoid potentially massive penalties, and Old Mill is encouraging those affected to act now.
“As well as being an opportunity to regularise their personal affairs, the New Disclosure Opportunity offers tax payers the chance to manage down and contain related exposure to penalties, to a probable 10 per cent of the tax previously unpaid (or 20 per cent for those who didn’t respond to HMRC in 2007), in response to an offer made under the original Offshore Disclosure Opportunity”, explained Mr Lockhart.
There is a three month window of opportunity from 1 September 2009 during which tax payers will be able to approach HMRC with a view to making full disclosure (in certain circumstances this period will be extended to 12 March 2010 where disclosure follows a prescribed and “on line” process).
“In the event of continued non disclosure and future “discovery” on the part of HMRC, which is now far more likely given their new powers, delinquent tax payers can expect little sympathy on the part of the Authorities,” warned Mr Lockhart, “expect draconian penalties of up to 100 per cent of the tax unpaid in addition to interest charges.
“This is possibly HMRC’s largest tax evasion initiative to date – those who ignore it do so at their own peril,” he said.