HM Revenue and Customs (HMRC) has extended its tax ‘amnesty’ for people with undeclared funds in offshore accounts.
The original deadline, under the tax authority’s New Disclosure Opportunity (NDO), for informing HMRC of funds in overseas accounts that may be liable to tax charges had been set for 30 November.
However, HMRC has responded to the concerns of banks about the limited amount of time they have been given to contact offshore customers by extending that deadline to 4 January.
Over 300 banks and financial institutions have been asked to hand over details of their customers’ offshore accounts.
The information that is supplied by the banks will be used to double check the disclosures that people make voluntarily on their offshore assets to ensure the two tally and that the correct amount of tax is being paid.
Banks, however, have argued that the procedure is too complicated to achieve within the timetable first laid down by HMRC.
Once account details have been disclosed to HMRC, the banks must then inform customers that the information has been passed on. After that, account holders need to register with HMRC if they are to take advantage of the lower penalties allowed under the NDO.
Some 100,000 accounts have been targeted, with estimates that 20,000 of them will indicate hidden, undeclared assets.
But, with tens of thousands of letters still be sent out, HMRC has conceded that the deadline is unrealistic and has decided to push the registration date back five weeks.
The NDO is the latest, and last, ‘amnesty’ for taxpayers with undeclared funds in offshore bank accounts on which tax may be owing.
HMRC launched its first amnesty, or Offshore Disclosure Facility (ODF), in 2007 and recouped some £400 million in unpaid taxes from 45,000 people holding undeclared offshore accounts with five leading banks.
Under the New Disclosure Opportunity, people who contact HMRC voluntarily will only face a penalty charge on undeclared, unpaid taxes of 10 per cent of what is owed.
In principle, HMRC is entitled to impose a fine of 100 per cent but is hoping that, as in 2007, the reduced penalty will encourage more account holders to come forward.
Higher rate taxpayers with offshore savings accounts need to pay 40 per cent tax on the interest that is generated, irrespective of whether the money is re-introduced to the UK. Basic-rate taxpayers must pay 20 per cent.
HMRC is also tracking tax owed on other assets such as holiday homes which have produced income from lettings.
It is thought that fewer than 10 per cent of those who may be liable to tax from income on undeclared overseas accounts have so far responded to the NDO, which was launched in July.
Dave Hartnett, HMRC’s permanent secretary for tax, said: “We know that some bank customers will not be contacted by their banks in good time for the original deadline of 30 November so in the interests of fairness we have decided to extend our deadline by a month to 4 January.
“I strongly urge anyone who has been hiding taxable assets offshore to go online and register. The NDO is voluntary, but from the start of the New Year we will begin to investigate those who were eligible to use the NDO but instead buried their heads in the sand. This is a great way to start the New Year – with the knowledge that your tax affairs are in order and the certainty that the penalty will be capped at 10 percent.”
To use the NDO a notification of intention to disclose must be made to HMRC by 4 January 2010.
Disclosures can then be submitted on paper by 31 January 2010 or electronically by 12 March 2010.
The penalty rate of 10 per cent will apply to those people who were not written to by HMRC under the Offshore Disclosure Facility (ODF) in 2007.
Those to whom HMRC offered the 10 per cent rate in 2007 but who did not complete the ODF procedure now have until 4 January 2010 to do so, although in their cases the penalty charge will be 20 per cent.
Once the NDO window closes on 12 March 2010, those taxpayers who have not come forward but are found to have unpaid tax liabilities will face penalties from 30 per cent up to 100 per cent of the tax owing.
Gary Ashford of the Chartered Institute of Taxation welcomed the announcement: "This is a sensible and realistic move which recognises the lack of time under the original deadlines. As we envisaged, there hasn't been enough time to sort out all the information from the various banks."
Date:27 November 2009
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