In a move that strengthens its position ahead of the launch of the New Disclosure Opportunity (NDO). HM Revenue & Customs (HMRC) now has the power to issue notices to over 300 financial institutions in the UK, requiring them to provide information about offshore account holders. Client Partner Ian Hewitt says “As part of its first Offshore Disclosure Facility (’ODF’) in 2007, HMRC obtained offshore bank account details from the five main high street banks. It now has the power to force almost every other financial institution in the UK with overseas connections to disclose similar information about their customers - so the chances of avoiding detection are decreasing!”
Once it has this information, HMRC will use it to check the tax records of the individuals to which it relates and compare it with any disclosures they make via the NDO. Anyone who decides not to make a disclosure (or to make an incorrect one) is likely to be investigated by HMRC and face higher financial penalties or possible prosecution. Taxpayers would be foolish to ignore the potential benefits of the NDO.
“HMRC will not be writing to taxpayers to confirm that it knows about the offshore income/assets, but taxpayers should expect their details to be with HMRC soon. They need to take advantage of this New Disclosure Opportunity (NDO) and its beneficial penalty arrangements. If not, then they could be subject to a robust investigation by HMRC in the future and the threat of possible prosecution cannot be ruled out.” Ian Hewitt added. “HMRC has stressed that the NDO will be the ‘last opportunity of its kind’ for taxpayers to bring their tax affairs up-to-date. Taxpayers should heed this warning!. Whilst HMRC could possibly run similar campaigns in the future, any penalties that might be charged will be much higher”
As part of HMRC’s wider ‘Offshore Campaign’, it has also signed a historic agreement with a known ‘tax haven’, Liechtenstein, to enable information on individuals who hold accounts in that country to be exchanged with HMRC.
HMRC has announced a bespoke Liechtenstein Disclosure Facility (LDF) to allow UK residents with undeclared income arising from Liechtenstein accounts/assets to clear up their affairs. Penalties charged on unpaid tax under the LDF will be capped at 10% provided a full disclosure has been made. The LDF covers the last ten years and those who fail to make a full disclosure by the end of the facility will have their accounts in Liechtenstein closed. Ian concluded “One thing is certain. Anyone with undeclared liabilities who does not make a full disclosure either through the NDO or via a separate approach to HMRC (such as the facility recently launched in respect of accounts/assets in Liechtenstein) is risking significantly higher financial penalties than those being offered by HMRC or possible prosecution. Taxpayers should take advantage of the NDO or Liechtenstein facility and bring their affairs up to date as quickly as possible.”
These latest moves by HMRC reiterate that anyone who has undeclared income arising from offshore accounts/assets needs to make a full disclosure to HMRC, either through the NDO or via a separate approach (such as the LDF). If not, they will, at best, face significantly higher penalties or, at worst, possible prosecution. Disclosures to HMRC need to be carefully handled and anybody affected by HMRC’s campaign is strongly advised to seek specialist professional advice before approaching HMRC.
For further information, please contact Ian Hewitt on 01494 683725 or complete the contact form below.