By Peter Dempsey, Partner, Private Client Department – Kerman & Co LLP
HMRC have launched a new “offshore” disclosure initiative to allow individuals with unpaid taxes linked to offshore accounts or assets to settle their tax liabilities at a favourable penalty rate.
To encourage disclosure under the new initiative, New Disclosure Opportunity (NDO), those who make a complete and accurate disclosure will qualify for a 10% penalty. Those who do not take up this opportunity run the risk of a much higher penalty of at least 30% and up to 100% of the tax evaded if subsequently found to have undeclared tax liabilities and may also face criminal prosecution.
HMRC are hoping to encourage those that did not take advantage of the government’s previous initiative, Offshore Disclosure Facility, in 2007 to utilise the NDO. However, unlike the 2007 initiative which was aimed at customers of five large banks, the NDO is available to everyone.
Dave Hartnett, HMRC Permanent Secretary for Tax has warned that the NDO “…will be the last opportunity of its kind.”
The details of the scheme are as follows:
- To use the NDO notification of the intention to disclose must be made first. This needs to be made between 1 September 2009 and 30 November 2009 (from 1 October 2009 if notification is electronic)
- The HMRC will then issue a Disclosure Reference Number (DRN). Using the DRN disclosure must be made by 31 January 2010 if using a paper method or if electronically by 12 March 2010.
- Disclosure is not complete until the amount disclosed has been paid and HMRC is satisfied that the disclosure is accurate.
The 2007 “amnesty”, as some called the ODF, was aimed mainly at foreign bank accounts in the wake of HMRC’s success in the Barclays case. This new scheme is broader but the other side of the coin is that the HMRC are beginning to pursue non-disclosure of offshore sources far more aggressively – partly because they need the money, and partly because attacking tax-efficient offshore centres is currently fashionable.
Non-domiciled taxpayers who have non-UK assets of any kind which give rise to income or gains covered by the remittance basis are not affected by the NDO. Their non-UK income and gains are not taxable unless remitted to the UK. Those who have lived in the UK for more then seven years will however have to pay the £30,000 annual charge to retain the benefit of the remittance basis.
Peter Dempsey is a partner in the Private Client Department at Kerman & Co LLP. If require further information on this or any other aspect of private client services please contact Peter on 020 7539 7272 or [email protected]
