NDO may expose you to 20 years of back taxes

Tuesday, August 18, 2009 | Posted by: Paul Roberts
Categories: Personal | Tags: HMRC, Liechtenstein Disclosure Facility, tax amnesty, Liechtenstein, Offshore Disclosure Facility, New Disclosure Opportunity, LDF, offshore assets, untaxed income, Paul Roberts, Public Accounts Committee

With a few last-minute tweaks, HM Revenue & Customs (HMRC) has now published details of the New Disclosure Opportunity (NDO). As you know, this is aimed at UK taxpayers and encourages them to declare previously untaxed income that has an offshore link. But this worries me and here I’ll explain why…

The NDO includes:

• offshore bank accounts
• offshore investment income or capital gains including property
• offshore trading income
• offshore trusts

HMRC has also announced an agreement with Liechtenstein which includes a separate ‘amnesty’ for UK taxpayers with accounts in the principality - the Liechtenstein Disclosure Facility (LDF).

My own concerns on the newly announced ‘tax amnesty’ include that there is no immunity from prosecution – taxpayers are still potentially exposed to taxes from the previous 20 years (or 10 years under the LDF). The timeframe for finalising the required forms under the NDO is quite tight given the complexities involved and that given the global attack on ‘banking secrecy’ then clients cannot just assume HMRC will not catch them.

HMRC has suggested it will adopt a high-profile publicity campaign during September to ensure everyone with offshore assets becomes aware of their ‘last ever’ tax amnesty.

You can see that there is a consistent offshore ‘theme’ and you may be thinking ‘what about the working taxpayer who doesn’t have any fancy offshore this and that, but forgot about the income from their weekend ice-cream van round or their cottage in the country?’

Unlike the 2007 Offshore Disclosure Facility (ODF), with this NDO there is no formal parallel onshore disclosure opportunity.

However, anyone wanting to clean up their affairs before the taxman comes knocking should be able to get similar terms provided they make the correct approach to HMRC.

So how do you do this?

Firstly, find someone who knows HMRC and can help you to reduce the risks and take the sting out of the tail. A good tax investigation specialist should work with you to reduce the risk of potential criminal prosecution and achieve the best possible cash settlement with HMRC.

If you’ve been through this before, I would be interested to hear about your experiences of the previous ODF or voluntary disclosures to HMRC here on the blog.

While I am on the subject of onshore disclosures, one of my team, Dave Jennings, who is based in our Manchester office, has been doing some bedtime reading.

So if you need something to help you sleep, you could do worse than have a look at HMRC’s Departmental Report 2009. What Dave noticed is that during 2008-09, HMRC brought in more than £100m by securing registrations of 22,670 ‘ghosts’ and ‘moonlighters’, and it is to target hidden economy prosecutions as a deterrent to others.

HMRC’s increasing activity in the hidden economy (people who have not registered some or all of their income to HMRC) comes from being under the Public Accounts Committee’s (PAC’s) spotlight. Many recommendations by the PAC are implemented by HMRC and another recommendation was to increase the number of prosecutions and to enforce higher penalties for tax evaders.