Offshore Disclosure Facility: Tax Amnesty 2007

HMRC announced a 2nd Tax Amnesty ( The New Disclosure Opportunity) starting September 2009. But what was the 1st Tax Amnesty  (The Offshore Disclosure Facility) about?

HM Revenue & Customs obtained details of around 100,000 offshore bank accounts registered to UK residents. In April 2007 HMRC came up with the Offshore Disclosure Facility (ODF) (Tax Amnesty), to encourage as many people to come forward as possible, for the least cost to the Revenue.

It wasn’t a true tax amnesty; they didn’t let people off any tax due. It was an incentivised tax evasion disclosure project aimed at people with interest arising from offshore banks accounts, but anyone could use the Facility, if they’d underpaid tax. In reward for stepping forward and disclosing historic tax liabilities, taxpayers were guaranteed a 10% penalty, instead of the more typical 35-65% penalties. The minimum penalty for anyone who didn’t come forward, or who made an incorrect disclosure, was set at 30%.

What happened to the Disclosures?

HMRC received 45,000 disclosures, totalling £400million. The vast majority were accepted. Those selected for review are being subject to an in-depth audit. Any additional tax arising will be subject to a penalty of at least 30% of the tax. Specialist tax fraud investigators from HMRC’s Specialist Investigations branch and the Civil Investigation of Fraud (CIF) units are reviewing the larger cases. The most serious cases will be referred to the Revenue & Customs Prosecution Office (RCPO) for them to consider criminal charges. Some prosecutions have already started.

What if I disclosed under ODF 2007 and am being investigated?

You may need specialist help. HMRC clearly suspect your disclosure was incomplete or incorrect. They could start a criminal investigation. They are likely to subject you and your business to an in-depth and intrusive investigation. It could cost you a lot in tax, very high penalties and disruption to your business and personal life.

What if I’ve got an offshore bank account and didn’t disclose under ODF 2007?

You could be in serious trouble; but you’re not the only one, and you can still improve your position. HMRC are believed to have obtained details of a further 100,000 offshore bank accounts (i.e 200,000 in total). It can still be highly beneficial to make a voluntary disclosure of any tax irregularities to HMRC to minimise the risk of prosecution and substantially reduce penalties. You may well be eligible to use the 2009 Tax Amnesty - The New Disclosure Opportunity.  We can manage the disclosure rather than have Tax Inspectors enquiring intrusively into your business and financial affairs; possibly visiting your business contacts.   Provided that a full disclosure is made of all irregularities (and for all years), the taxpayer will pay a reduced penalty, compared to the normal regime. Tax must be paid on all undeclared income and gains, as well as interest. The amount of penalty charged for ODF "refuseniks" who come forward now will depend partly on which bank the offshore account was held with and whether HMRC wrote to you at the time.

The New Disclosure Opportunity: Tax Amnesty 2009

The New Disclosure Opportunity is the 2nd “Tax Amnesty” that HMRC has offered. The taxman now accepts that the 1st Tax Amnesty  (the Offshore Disclosure Facility) was not well-publicised, so anyone with an offshore bank account is being given another chance to come forward; even those non-compliant individuals who held offshore bank accounts with banks covered by the 1st Tax Amnesty (HSBC, HBOS, Lloyds, RBS or Barclays) are being given a last chance to come forward.  HMRC insist there will be no further opportunities.

Taxpayers with tax irregularities and offshore bank accounts to disclose should therefore come forward now.  If they do not take the opportunity, HMRC will seek to identify them – using the vast amount of information that all banks are now being forced to disclose to HMRC about their offshore customers – and impose substantially higher penalties.  They have also indicated that some will be prosecuted and face jail and confiscation orders.

The penalty for disclosures made under the NDO will be 10% of the tax due. However, anyone who held accounts with HSBC, HBOS, Lloyds, RBS or Barclays, and who were offered the opportunity to disclose under the ODF in 2007,  will face a 20% penalty; although this may be reduced in certain circumstances.

The New Disclosure Opportunity Tax Amnesty starts in September 2009 and the full disclosure must be finalised online by March 2010 (or January 2010 if the disclosure is filed in paper form).  This timescale is tight and full payment must be made by the deadline, in order for the taxpayer to qualify for the reduced penalty.  HMRC will not simply be looking for tax on interest earned in offshore accounts. HMRC will also be seeking tax, interest and penalties on the underlying capital held in the accounts where this has arisen from a taxable source but has not previously been declared.

We at Lynam Tax have vast practical experience in managing tax disclosures and we successfully managed a score of Offshore Disclosure Facility 2007 investigations.  We are already dealing with a number of New Disclosure Opportunity Tax Amnesty cases. We have a number of instances where no tax was actually due (e.g. because our client was non-resident or non-domiciled in the UK) and have even had cases where we got clients repayments! We can advise you on the best course of action and, if appropriate, help you manage any necessary disclosures in order to obtain the optimum outcome for you, your business and your family.

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