Should you own up in HMRC’s second ‘tax amnesty’?

Monday, July 20, 2009 | Posted by: Paul Roberts
Categories: Protecting your wealth | Tags: tax, HNWIs, offshore, compliance, tax havens, disclosure, Protect Your Wealth, tax amnesty, Liechtenstein, Offshore Disclosure Facility, New Disclosure Opportunity, OECD, Paul Roberts, tax prosecutions

So, a New Disclosure Opportunity (NDO) is on the horizon this autumn. The Government has a large tax gap to fill and will see the NDO as one way to raise funds. For the taxpayer, this means another chance to ‘come clean’ or face the consequences. The question is, should you?

This second ‘tax amnesty’ follows the previous Offshore Disclosure Facility (ODF) made by HM Revenue & Customs (HMRC) in 2007. Ironically, comments by HMRC and advisors at the time included: ‘This initiative will not be repeated’; ‘This is your only chance to come clean before serious action is taken’; and ‘The offer will be for a limited period after which investors will face heavy penalties.’

And yet we now find ourselves with an NDO on the table this autumn. This gives a second chance to those who missed the boat the first time around. Further details on who it affects and how can be found here.

Risk of penalties and prosecution
The NDO is not a true ‘amnesty’ in that HMRC is likely to reserve the right to prosecute the most serious cases. So if relevant why should you take advantage of this opportunity?

Well, failure to do so will result in the ramping up of penalties for those who could come clean but choose not to. Although investors outside of the previous ODF, which targeted those with undisclosed offshore accounts with the big 5 banks, will probably benefit from a reduced 10% penalty only, those who were specifically targeted last time could face higher penalties.

Failure to make use of this NDO is likely to result in a minimum 30% penalty of the tax due. That may sound draconian but HMRC has said that it will ‘relentlessly pursue those that bend or break the rules’ and penalties can be as high as 100% of any unpaid tax.

This time, HMRC is also armed with far more information. It has, for example, purchased disks with details of around 300 Britons who hold accounts in Liechtenstein. It is also contacting hundreds of financial institutions for details of all of their offshore accounts and it still has the unused data from the previous ‘tax amnesty’.

For some people, the NDO may not be the best way to properly disclose any unpaid tax to HMRC and they should seek specialist advice.

UPDATE: HMRC has now released further details of the NDO. For further information, read the media release.