The chance to participate in the New Disclosure Opportunity (NDO) ended on 4 January 2010. Anyone with undeclared offshore income or assets who wishes to disclose them to HM Revenue & Customs (HMRC) can no longer do so through this facility. From the beginning of February 2010 onwards, only those who notified HMRC of their intention to disclose before 4 January 2010 can make a disclosure and they must do so online by 12 March 2010. All disclosures must include a calculation of the tax, interest and NDO penalty due and be accompanied by full payment.
So, will the NDO be a success?
Ultimately, HMRC will be judged by the additional revenues collected via the NDO, but early indications suggest that it might not be as successful as HMRC had hoped. Around 10,000 people are understood to have notified their intention to make a disclosure, compared to around 45,000 disclosures made through the 2007 Offshore Disclosure Facility (ODF). The ODF generated £400million so, if the NDO disclosures are at similar levels, HMRC might not even reach £100million. Whilst any additional revenues at this time will undoubtedly be welcomed by the Treasury, surely it expected more than £100million?!
HMRC has said that it expects NDO disclosures to involve more complex tax issues than those typically made via the ODF, with the implication being that these will involve higher undeclared tax liabilities. We will see, but can the increased yield offset the 78% fall in the number of notifications compared to the ODF?
One factor that appears to have ‘clouded’ the NDO, is the launch of a bespoke Liechtenstein Disclosure Facility (LDF). The LDF offers those who qualify, the opportunity to disclose tax irregularities from April 1999 onwards (as opposed to the last 20 years required by the NDO). It also offers taxpayers more time to submit a disclosure and immunity from prosecution if a full disclosure is made. To qualify, taxpayers don’t even have to have held their funds or assets in Liechtenstein! As a result, many taxpayers with more complex offshore affairs (and possibly greater wealth) are looking to make their disclosures via the LDF rather than the NDO, with potentially huge ‘savings’ in the amount that will be paid to HMRC.
Inevitably, there will be those taxpayers who decide to ‘take their chances’ and not disclose. If they are caught by HMRC, they will certainly face significantly higher financial penalties. Worse still, they could be prosecuted. HMRC now has more information/data than ever before about UK taxpayers with offshore accounts and it intends to use that information to detect, investigate and punish suspected tax evasion or avoidance. The net is definitely closing in!
Although participation in the NDO is now no longer possible, anyone with undeclared offshore income or assets is still strongly advised to make a disclosure to HMRC. By approaching HMRC (rather than risking HMRC initiating an investigation), taxpayers can help reduce the potential financial penalties that could be charged and best protect themselves from potential prosecution.
Any approach to HMRC can be difficult to manage and is fraught with uncertainty. Specialist advice before any disclosure is made can help assuage concerns and is strongly recommended. Vantis’ Investigations and Enquiries team is well placed to advise on such matters.
For further information, or to discuss any of the points above, please contact either Gary Rowson or Mark Ayre on 020 7417 0417. Alternatively, please complete and submit the online form below.