On 28 July 2009 HM Revenue & Customs (HMRC) formally announced the ‘New Disclosure Opportunity’ (NDO) which is to be offered to UK residents with unpaid tax related to offshore bank accounts. The NDO follows a similar pattern to the 2007 ‘Offshore Disclosure Facility’ (ODF) which was prompted by five UK High Street Banks being forced to hand over details of offshore bank accounts held by their UK customers. Since 2007 HMRC has succesfully approached hundreds of other banks and financial institutions operating in the UK and is compiling a massive database of offshore accounts operated by customers of these entities.
The NDO will run from the 1 September 2009 until 12 March 2010 and provide a final opportunity for offshore account holders to disclose unpaid tax relating to their accounts and put their tax affairs in order. Taxpayers taking up this opportunity will be expected to pay the tax they owe, plus interest and a financial penalty.
In my opinion, the ODF was probably regarded as a disappointment by HMRC despite raising an additional £400m in unpaid taxes. This is why we now have a second ODF in the form of the NDO. HMRC were initially targetting 100,000 disclosures from the ODF but only received 45,000. HMRC now hope that the remaining 55,000 or so will come forward under the NDO but with more or less the same terms as the ODF, what does the NDO have to prompt those to now come forward who didn’t under the ODF?
One of the main incentives will be the tax geared penalty. Unless HMRC specifically contacted a taxpayer under the ODF, a disclosure under the NDO will again be subject to a 10% penalty, much lower than could normally be expected. Anyone not coming forward under the NDO who is later found to have unpaid tax from an offshore bank account will face a much higher penalty of at least 30%.
In my view, the NDO represents a final one-off opportunity to come clean and pay any unpaid tax and interest together with a low tax geared penalty. By making a disclosure under the NDO (or outside the NDO if the issues are more serious and/or complex) and settling unpaid tax, interest and penalties, funds considered by taxpayers as practically ‘untouchable’ overseas can either be enjoyed in the knowledge they are ‘clean’ or incorporated into legitimate planning strategies e.g. for Inheritance Tax purposes.
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