HMRC have now outlined the “Key Feature and terms used in the New Disclosure Opportunity (NDO)“, the so-called Tax Amnesty . This is the latest initiative of their “Offshore Campaign” to get UK taxpayers to declare income and gains related to offshore bank accounts and assets: the so-called Tax Amnesty. We’ve set out the taxman’s guidance to the New Disclosure Opportunity (NDO) in full below.
“The NDO is part of the HM Revenue & Customs (HMRC) Offshore Campaign and will allow people with unpaid taxes linked to offshore accounts or assets to settle their tax liabilities at a favourable penalty rate. Those who choose not to take up this opportunity and are subsequently found to have unpaid tax liabilities will face much higher penalties and run a risk of criminal prosecution. The Offshore Campaign includes not only the NDO, but also the activity by HMRC following NDO to pursue all those who should have disclosed but chose not to.
Offshore: ‘Offshore’ means anywhere outside the United Kingdom of Great Britain and Northern Ireland. Therefore offshore accounts or assets include any held in the Channel Islands, the Isle of Man, the Republic of Ireland and other tax havens.
Asset: Literally it can be any possession or property available to meet debts. The main (but not exclusive) examples of assets associated with NDO are: bonds or other financial products; Land/Property; Trusts; business interests; other for example, yachts, vehicles.
Notification and disclosure
The process you will need to go through in order to benefit from the favourable terms of NDO.
You must do both if you wish to disclose unpaid tax liabilities linked to offshore accounts or assets. You must notify during the notification period and, using the Disclosure Reference Number (DRN) you receive on notifying, you should then disclose before the NDO closes either on paper by 31 January 2010 or electronically by 12 March 2010. Some details on notification and disclosure are below.
Letting HMRC know who you are and your intention to disclose.
To notify you will need to provide items of personal data such as name, Date of Birth (DOB) and a contact address. You will not need to provide the details of any accounts or assets at this point. Notification begins 1 September 2009 (paper only – electronic notification from October 2009). Ends 30 November 2009 (paper and electronic).
Using the form provided, tell us about all undeclared UK tax liabilities – not just those connected with offshore accounts or assets.
Start getting information together now. You should calculate your total liability for all undeclared taxes and duties – including interest and penalty. This will need to be as accurate as possible, though we accept that in some circumstances this may need to be an estimate. We will provide guidance to help with disclosure and calculation of liability.
The main things you are going to need to let HMRC have when you make a disclosure. It will need to contain:
- disclosure of at least one unpaid tax or duty (for example, Income Tax);
- a summary of all tax and/or duties, interest and penalties due;
- details of offshore bank accounts relevant to the disclosure and/or open at 5 April 2008;
- details of offshore assets held at 5 April 2008; an offer to pay;
- a declaration that the disclosure is correct and complete; payment.
Disclosure is not complete – and therefore cannot be accepted – until the amount disclosed has been paid. This must be done, unless we agree a special arrangement to pay by that date, by 31 January 2010 for paper disclosure and 12 March 2010 for electronic disclosure.
Disclosure Acceptance: The point at which HMRC accept your disclosure.
For us to accept a disclosure it must be complete. We will be checking disclosures to make sure we are satisfied they are complete. Remember, you will have to include all undisclosed amounts and assets that tax/duties should be paid on, not just those linked to offshore accounts and assets. When we are satisfied this is the case we will send the acceptance.
Paper: A return to HMRC of notification and/or disclosure using a paper form.
If you choose to notify and disclose on paper you can do so. You can notify between 1 September 2009 and 30 November 2009 and disclose anytime from 1 September 2009 until 31 January 2010. You can disclose electronically until 12 March 2010, even if you notify us on paper – you just need to use your Disclosure Reference Number (DRN) which we will provide to you when you notify.
Electronic: Notification and/or disclosure to HMRC using the electronic channel provided.
If you choose to notify and disclose electronically you can do so. You can notify electronically between October 2009 and 30 November 2009 and disclose anytime from October 2009 until 12 March 2010. If you choose you can notify using paper from 1 September 2009 and then disclose electronically later – you just need to use your DRN.
Agent nomination: You can nominate an agent to Notify and Disclose on your behalf.
The NDO allows you to nominate an agent to handle notification and disclosure on your behalf. You will just have to let us know. Details of how to do this will be included in the guidance and instructions.
De Minimis: Threshold below which we will not consider a penalty.
Within NDO, where unpaid tax and duties are due on small amounts a penalty will not be due. If the total amount of the unpaid liability being disclosed is less than £1,000, you need not pay a penalty.
Penalty:The amount charged in addition to the unpaid tax/duties and interest.
Penalties are fixed within NDO at 10% or 20%.
- 10% rate of penalty is applicable to everyone making a notification and disclosure of an unpaid liability of £1,000 or more unless certain circumstances apply where a 20% penalty is appropriate.
- 20% rate of penalty is only applicable to those to whom HMRC wrote in 2007 offering the 10% rate, but who did not complete the Offshore Disclosure Facility (ODF) procedure and now want to disclose.
Financial Institutions in scope:
All of the banks, building societies and other financial institutions that provide Offshore accounts or structures anywhere in the world. Already in 2009 HMRC has gathered details of offshore accounts and structures offered by banks and financial institutions and that is going to continue.
Guidance and instruction: HMRC detailed guidance showing you how to take part in the NDO.
HMRC will provide step by step guidance on how to take part in the NDO from 1 September 2009. The guidance will be available on our website, where anyone can download it. There will also be an associated frequently asked questions (FAQ) section. In addition to this there will be specially trained HMRC personnel who will be able to handle more complex enquires for those not finding the answer they want in the guidance.
Prosecution: Criminal proceedings taken by HMRC against an individual or business.
Nobody out of the tens of thousands who made full and accurate disclosures under the original ODF in 2007 has yet been subject to prosecution. Whilst decisions on prosecutions are ultimately not taken by HMRC, it is extremely unlikely that anyone making a full and accurate disclosure would be subject to prosecution other than in very exceptional circumstances for example where the liability relates to income derived from very serious crime. However those taxpayers who do not come forward and are subsequently found to have unpaid tax liabilities will face penalties of at least 30% rising to 100% of the tax evaded. They also run a risk of criminal prosecution.”
What does this mean for me?
If you have any undeclared tax liabilities and also an offshore bank account or any offshore assets, truts or property then you can use the NDO. The New Disclosure Opportunity Tax Amnesty process is straightforward in simple cases. But there are many pitfalls for the unwary or those with more complex tax affairs. Badly managed Disclosures can have the reverse effect; leading to higher penalties and even prosecution. If you have very straightforward tax affairs you may be able to handle the disclosure yourself or with the help of your usual general practitioner accountant. If your tax affairs are more complicated (e.g. you have several sources of income; or your offshore accounts are more than 6 years old; or you are a UK trader who has undeclared trading income; or your domicile or residence status is unclear; or you are an executor of an estate that did not declare an offshore asset/ bank account for IHT purposes; or you are currently subject to a tax enquiry or investigation) then you may need specialist help.
If you are concerned about an offshore bank account or offshore assets, or have any historic tax liabilities that are worrying you, or think the New Disclosure Opportunity may benefit you: then Lynam Tax Enquiry Experts can help. Call today for a confidential, discreet discussion with our experienced Tax Dispute Specialists.
Call Paul Lynam now on 0845 643 9997