Tax amnesty for offshore income & undeclared income generally

HM Revenue & Customs (HMRC) now has more information on offshore account holders than it could possibly ever sift through and it does not have the resources to deal with the sheer volume. As a UK resident individual, there is of course nothing wrong with holding an offshore account as long as you pay any tax due on the money deposited in it, and on the interest from it. If you have done this then you have no concerns.

HMRC has therefore announced an amnesty for anyone who has undeclared offshore income using a specially designed “offshore disclosure facility”. This facility is designed to encourage those with tax to pay to get their affairs up to date. It will allow anyone who comes forward to declare unreported income of less than £2,500 without penalty and those with higher undisclosed income will pay a low penalty of just 10% of the tax due on their undeclared income. Interest will apply, however, from the normal due dates for both direct and indirect tax.

The new disclosure facility is open to those who hold or have held an offshore account, either directly or indirectly, that is in any way connected to a loss of UK tax and/or duty.

For a limited period, taxpayers can also come forward and make a full disclosure of all undeclared liabilities, not just those connected with an offshore account. Taxpayers can make a personal disclosure or one on behalf of others too. Disclosure could therefore cover any form of tax, including but not limited to undeclared interest, property rentals, gifts for IHT purposes, or company loans to participators.

There are two stages to the disclosure process: notification and disclosure. Notification has to be made by 22 June 2007 and disclosure and payment of tax, interest and penalty by 26 November 2007 . HMRC say that they will confirm if a disclosure has been accepted as soon as possible but by 30 April 2008 after various checks have been made to agree what is being offered. Disclosure will not be possible under this facility for those who are already undergoing investigation.

HMRC have stated that they will pursue those with tax liabilities who have decided not to make a disclosure and they will then face full penalties and possible criminal proceedings.

If you have any concerns that you might have any undisclosed income which needs to be advised to the Revenue I would strongly suggest that you give me a call as soon as possible to discuss this further as the amnesty window closes on 22 June 2007.

Sue Stephens
Tax Manager