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July 28, 2009 3:37 pm
UK residents with unpaid taxes linked to accounts held offshore are being given a “last opportunity” to pay back their taxes or face the risk of a hefty fine and criminal prosecution.
HM Revenue and Customs on Tuesday announced details of its second disclosure initiative to allow people to settle their tax bill.
If savers make a complete and accurate disclosure between September 1 and March 12, they will only face a penalty of 10 per cent of the unpaid tax they owe. After this the penalty rises to 30 per cent or more and the likelihood of prosecution will also rise, the Revenue said.
Stephen Timms MP, financial secretary to the Treasury, said: “I would urge anyone with offshore accounts holding untaxed income or gains to take advantage of this simple and straightforward scheme.
“Most offshore investors already pay the tax that the law requires and it’s only fair that everyone respects the rules.”
UK residents with offshore accounts must pay tax on the interest they earn even if they do not bring the money back into the UK. Those that do not declare their offshore income face penalties of up to 100 per cent of tax owed and may face prosecution.
This is the second time the taxman has given an amnesty to people with outstanding liabilities linked to offshore accounts or assets. The first campaign in 2007 focused on customers of five large banks and raised about £450m in unpaid tax from the 45,000 or so customers who came forward.
The latest initiative, called the “New Disclosure Opportunity”, covers customers of more than 250 banks with branches in the UK, including many banks with overseas parent companies.
Although the number of banks covered this time is greater, experts predict that the number of disclosures this time will be lower – but the complexity and amounts involved per case will be significantly higher.
Typical examples seen under the first amnesty included undeclared takings from UK businesses, rental income from overseas properties and income earned overseas by UK residents that was undeclared in the UK.
“This is the last chance saloon for people with offshore bank accounts who have evaded tax,” said Chris Oates, partner in Ernst & Young’s London tax controversy and risk management practice.
“HMRC is not just interested in undisclosed income from these accounts, but also the possibility that the capital comes from an untaxed source. If people do not take this opportunity and their tax position is not correct, then they should expect HMRC to come down on them very hard.”
Mr Oates warned that although the move has has been dubbed an amnesty, it is not. “There is no immunity from prosecution – for organised crime, for instance – and all tax and interest must be accounted for,” he said.
However, other experts suggested that HMRC’s resources were stretched and it did not have the time to chase up every non taxpayer – but it still needed the money because the recession was creating a shortfall in the overall tax take.
Chas Roy-Chowdhury, head of taxation at the Association of Chartered Certified Accountants, said: “HMRC will dig a lot deeper if people do not disclose their income details or monies held in offshore accounts. As the country’s tax take is down, HMRC will be looking to pursue tax evasion in a more aggressive and structured way.
“This new initiative is a good use of HMRC’s resources. ACCA has long asserted that tax evasion needs to be tackled in a consistent and constructive manner, and offering a favourable penalty rate is an olive branch from HMRC for offshore account holders.”
The procedure for declaring the unpaid tax is “simple and straightforward”, the Revenue said.
“Customers will be able to contact us on paper or through a dedicated area of our website,” said Dave Hartnett, HMRC permanent secretary for tax. “This will be the last opportunity of its kind.”
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