Declare offshore interests soon – or pay the penalty
From Eastern Daily Press – Saturday 2 June, 2007 – Money Matters
People not paying their dues on their offshore investments have just a few days left to confess all to the taxman – otherwise it could cost them a whole lot more. Personal finance writer ADAM AIKEN reports.
People with offshore bank accounts are being urged to get their skates on and make sure they have fully met their tax liabilities, or they are at risk of being targeted in a crackdown by Revenue & Customs (HMRC).
The taxman has forced the high-street banks to hand over details about their offshore account-holders, and HMRC is determined to make sure that investors are not using these accounts to avoid paying tax.
But in a bid to encourage investors to open their books, HMRC has said that it will collect only 10pc of the tax that is owed – provided people come forward by June 22.
For those who meet that deadline, payment of tax, duties, interest and penalties will be due by November 26.
“The offshore disclosure facility is open to people who hold or have held offshore accounts that are in any way connected to a loss of UK tax and/or duty,” said HMRC spokesman Maddy Ratnett.
“At the same time, we are encouraging people to come forward and disclose any other previously undeclared liabilities they may have - offshore and onshore.”
If you don’t come forward, you face the wrath of HMRC, which has promised to come down hard on people it suspects of not paying their dues.
The taxman intends collecting unpaid tax going back up to 20 years. “The words ‘tax amnesty’ have not been mentioned,” said Tim Thomas, of Yarmouth-based chartered accountants M Hoose & Co.
“It is, however, an opportunity to tell HMRC about any undisclosed interest within a specified time limit, and in return HMRC may limit the penalties due on the tax to 10pc.
“Be warned that full disclosure does not just relate to overseas bank accounts.
“It refers to any irregularities of any kind, including income tax, VAT and national insurance contributions, so you cannot be selective as to what you disclose.”
Mr Thomas added that there were two methods of disclosure.
“For offshore matters, disclosure can be completed in writing or online,” he said.
“For onshore matters, however, disclosure must be given to your local tax office.
“The disclosure will need to be considered carefully as the consequences of incomplete disclosure could be serious.
“Professional help will be needed, especially for working out the amounts of tax, penalty and interest due.”
The initiative follows recent legal rulings that have forced the big five high street banks to hand over their customer details to the taxman.
Jason Howard, managing director of Norfolk-based Insight Financial Associates said: “The benefit of disclosure before June 22 is that the penalty will be capped at a 10th of the current maximum penalty.
“However, people will be expected to pay the outstanding tax and all interest going back 20 years.
“Note that if the disclosure deadline is missed, HMRC will already have the account-holder details supplied to them by the high-street banks.”
Mr Howard added: “Many of our clients who are sheltering their money in offshore bank accounts have been affected by the amnesty.
“This ruling has created great concern, but with good financial planning, future taxation benefits of holding cash in offshore accounts can still be achieved.
“It is paramount that those affected receive financial advice as this is affecting many individuals within the UK and their strategic planning for tax efficiency.”
Steve Besford, of tax adviser Chiltern, warned that those with undisclosed tax liability who did not notify HMRC by June 22 could find themselves under investigation as soon as next month.
In contrast, people who make clear their intention to make disclosures before June 22 will not be investigated before the November deadline.
“July 9 is the first date on which HMRC can be assured that all notifications have been processed and the appropriate ‘no inquiry’ signal posted to the taxpayers’ computer record,” Mr Besford said.
“If additional tax is found to be due as a result of these inquiries, HMRC will seek considerably higher penalties than the 10pc on offer under the amnesty and may even launch criminal investigations.”
There have been fears that the crackdown by HMRC will deter foreign property investment and lead to a slump in property sales, but one developer believes the move by the taxman could actually help the market.
“This initiative will help increase public awareness of overseas property ownership and dispel taxation and legal myths,” said Dani Maxton, managing director of Morpheus Investments.
“Ultimately, this will fuel Britain’s love affair with overseas property and drive sales.
“The tax crackdown throws the importance of location and property developer expertise into the spotlight.
“Choosing the right location – a country with an emerging property market, good weather, excellent local amenities and services, and good transport links – will yield significant returns, while dealing with a reputable developer will protect buyer interests.
“People who are considering investing in overseas property should ensure that they consult a developer with good knowledge of the relevant country, tax and property laws.”