The NDO: what was it?

The 2nd UK Tax Amnesty: the New Disclosure Opportunity (NDO) is now formally closed for registrations.  But what was it all about?

To take part in the NDO you had to register by 4 January 2009 and send in your full disclosure by 12 March 2010. If you missed the NDO don’t panic;  Lynam Tax may still be able to get you registered for an offshore tax amnesty on equally favourable terms. If you did register for the NDO (or its predecessor, the Offshore Disclosure Facility) and are now subject to an enquiry from the taxman, then you probably need specialist help from Lynam Tax Enquiry Experts.

What was the NDO?
The NDO followed the 1st Tax Amnesty in 2007; HMRC’s Offshore Disclosure Facility (ODF).  The taxman said this would be the last such chance to clear up historic tax problems on favourable penalty terms.  However, the parallel Liechtenstein Disclosure Facility (LDF) is also available to many people – and crucially, not just those with accounts already in Liechtenstein!  In fact, the LDF can offer even better terms than the NDO!

The NDO was not a full amnesty; they didn’t let people off back taxes.  It was an incentivised tax disclosure scheme, aimed at people with offshore bank accounts or assets. Anyone registering under the New Disclosure Opportunity Tax Amnesty qualified for a lower penalty (usually 10%) compared to the 35-200% they could otherwise face.

The 1st Tax Amnesty
The ODF was launched to help HMRC cope with a massive backlog of information about UK tax residents’ Offshore Bank Accounts.  HMRC had information on around 100,000 offshore bank accounts (from only 5 banks: RBS, HBOS, Lloyds, HSBC and Barclays) back in 2007.  They then sent formal notices out to get a lot more, probably another 100,000 (from 308 UK banks and financial institutions) plus they hope to get more information from most European banks).  HMRC say they had about 40-50,000 ODF disclosures (some of which they are investigating as incomplete – some on criminal lines), and they are now very slowly working through the non-disclosure cases (some with a view to Criminal Prosecution). The ODF disclosures produced about £400m and HMRC have so far collected another £100m from their ongoing enquiries.

HMRC needed to do something about the bulk of the ODF non-disclosure cases and the ‘industrial scale’ of new information – basically tens of thousands of copy bank statements from the offshore banks. Apart from a small number of selected prosecutions HMRC would be faced with long drawn out Civil Investigation of Fraud procedure cases.  Hence the NDO.

The 2009 Tax Amnesty (NDO)
This gave an opportunity for anyone with tax irregularities and an offshore bank account or offshore assets to quickly and easily clear up past tax problems, and obtain lower penalties.  It involved making a full, voluntary disclosure of past tax irregularities to the taxman.

The New Disclosure Opportunity Tax Amnesty process was straightforward in simple cases.  But there were many pitfalls for the unwary or those with more complex tax affairs.  Badly managed Disclosures could have the reverse effect; leading to higher penalties and even prosecution.

The New Disclosure Opportunity Tax Amnesty formally started on 1 September 2009 with a Registration process; following which the full disclosure had to be finalised online by 12 March 2010.  The timescale was tight, especially as full payment had to be made by the deadline in order to qualify for the reduced penalty.  HMRC are not just looking for the tax on the interest earned in offshore bank accounts, but are also seeking tax, interest and penalties on the underlying capital held in the accounts – where it came from an undeclared taxable source.  HMRC also expected a full disclosure of any other tax irregularities at the same time.  The New Disclosure Opportunity applied to all taxes, including Inheritance Tax.

The penalty for accepted disclosures made under the NDO will be 10% of the extra tax due. However, where HMRC wrote to  inform someone about the ODF in 2007,  they will face a minimum 20% penalty.  From 2011 the maximum penalty in offshore bank account tax investigations will be 200% of the tax due; plus the tax itself and interest!

HMRC will “risk review” all disclosures. If they grade a disclosure as “low risk” they will issue an acceptance letter within four months of the submission deadline (i.e. by 31 May 2010 for paper disclosures, 12 July 2010 for online disclosures).  If you disclosed but do not receive “clearance” by 12 July then you may need specialist help.   If you did not disclose, but have offshore interests and any undeclared tax liabilites, then you also need expert assistance.

Lynam Tax partners have enormous experience of Tax Disclosures,; the 1st Tax Amnesty (ODF), the NDO; managing HMRC tax enquiries; and are already helping a significant number of people with thesrd offshore tax amnesty the Liechtenstein Disclosure Facility.  We can assist you in maximising the benefits offered by the Tax Amnesties and reducing the risks associated with incomplete or non-disclosures: and those cases where HMRC are wrongly investigating your full disclosure.

For an initial free and totally confidential discussion: Call Paul Lynam now: on 0845 643 9997