The taxman plans to scupper offshore tax evasion with a whopping 200% penalty. HMRC has already obtained significant information on offshore bank accounts. These proposals (announced by the Chancellor in the PBR) introduce new penalties and, for the first time ever, a legal requirement to disclose offshore bank accounts to the tax office.
A specific extra 100% maximum penalty for tax evasion linked to assets held offshore will be introduced on top of the existing 100% maximum penalty for purely domestic tax evasion. So offshore tax evaders could face a maximum 200% penalty, on top of having to pay back tax for 20 years plus interest!
Also taxpayers will have to notify the opening of overseas bank accounts to HMRC, within 60 days of opening, along with an indication of the source of the funds. All new offshore bank accounts in countries without Tax Information Exchange Agreements with the UK will be notifiable. Accounts in some other jurisdictions will have to be disclosed if the balance in the account is over £25,000. The new notification requirement will be backed up with yet another new additional penalty.
So anyone failing to declare an offshore bank account could face tax geared penalties of up to 200% of the evaded tax; and further tax geared penalties for failing to disclose the account, plus interest!
Does this affect me?
The new notification requirement will only apply to individual UK Resident taxpayers. It will not apply to people who are non-UK domiciled and who pay the £30,000 Remittance Basis Charge. There are more new reporting proposals for offshore trusts, including a requirement for UK resident settlors to notify HMRC of transfer values into non-resident trusts or subsidiary companies of such trusts.
The proposed new penalties would apply for tax periods commencing from 1 April 2011.
For periods between April 2009 and April 2011, where undeclared offshore income or gains are identified, the taxman will charge higher penalties on the basis that the non-compliance is deliberate. For periods prior to April 2009, HMRC will treat tax evasion involving an offshore element as gravely serious mis-conduct and will seek corresponding high penalties. The maximum tax geared penalty is currently 100%.
If you are worried about any offshore bank accounts, assets, trusts etc, or you are facing a claim for tax geared penalties from HMRC, then Lynam Tax Enquiry Experts can help you.
Call Paul Lynam today for a friendly, confidential and no obligation discussion. Call now on 0845 643 9997.