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Offshore Bank Accounts - HMRC Amnesty Details

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The taxman has announced an amnesty to UK investors who may have hidden funds offshore in an attempt to pay less tax. The courts have recently required our major banks to release details regarding holders of offshore accounts to the Revenue as part of the drive to claim over £1bn in unpaid tax.

HMRC now have a huge volume of information on these issues and are likely to get more as the private banks are likely to follow suit.

Offshore accounts also include those held in Channel Islands, Isle of Man and Republic of Ireland.

It would appear that banks will be writing to their clients about details they have given to HMRC. As a result HMRC are now offering what they describe as "an offshore disclosure facility". Basically the facility is available if:

• You make an initial notification by 22 June 2007 that you intend to make a disclosure.
• You must make full disclosure and pay all taxes, duties, interest and penalties by 26 November 2007.
• As long as you make a full disclosure of all undeclared liabilities, including those unconnected with an offshore account, HMRC says they will limit your penalty to a fixed penalty of 10% of the tax or duties underpaid, or no penalty on disclosures of untaxed amounts totalling less than £2,500.
• You will need to fully disclose all matters that have resulted in tax avoidance in the last 20 years.

Be clear that all of the tax under declared in the last 20 years will still be due, as will statutory interest plus the 10% penalty. The facility is an offer to reduce penalties to 10% - HMRC have powers to charge penalties of up to 100% of the unpaid tax. There is no problem in having an offshore account as long as you have paid tax the correct amount of tax on the monies deposited and on any interest credited to the account.

HMRC advises that the vast majority of disclosures will be accepted. Decisions will be made and notified by 30 April 2008. However, certain disclosures are unlikely to be settled through the process, particularly:

• disclosures which are found to be materially incorrect or incomplete
• disclosures from taxpayers where HMRC has already begun an investigation or enquiry
• disclosures from anyone suspected of being involved in serious organised crime
• disclosures from those involved in wider criminality whose circumstances would result in a criminal investigation in accordance with HMRC’s prosecution policy.

As you may have inferred from this article the facility applies to all undisclosed issues that have resulted in unpaid tax in the last 20 years - if you have never opened an offshore bank account but still have other onshore issues that you want to disclose, you can do so in accordance with this facility.

HMRC have also advised that this facility should not be used for innocent errors as in these circumstances they will only go back 6 years and don't normally seek a penalty.If you feel that you need to make a full disclosure, we can help. Time is of the essence as your initial notification must be made before 22 June 2007.

Article provided by HfM - Small Business Accountants.

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Posted May 8, 2007