New Disclosure Opportunity (NDO)
PLEASE NOTE THAT THE CLOSING DATE FOR THIS OPPORTUNITY HAS NOW PASSED
On 22 April 2009, HMRC announced a new and final chance to disclose tax underpayments resulting from offshore accounts. They have stated that this is the final chance to disclose tax irregularities; there will not be another such opportunity.
HMRC has received data from financial institutions regarding money held offshore and expect to receive much more additional data over the coming months.
Those wanting to use this opportunity had to register with HMRC by 4 January 2010. If this deadline was missed the New Disclosure Opportunity cannot be used.
If tax, interest and a reduced penalty are paid by 12 March 2010 (if made online) and by 31 January 2010 (if made on paper), there is a high chance HMRC will accept the figures and move on. However, if individuals don’t disclose they will be investigated and maybe prosecuted.
Background
There is plenty of evidence worldwide of money held offshore and the tax authorities believe a lot of it should be taxed in their jurisdictions. In 2006/07 HMRC received details of 400,000 offshore bank accounts belonging to 260,000 individuals with UK addresses from 5 High Street Banks. They believed about 25% of these related to untaxed UK income or gains.
Between April and November 2007 HMRC offered an Offshore Disclosure Facility (ODF) for people who were willing to pay outstanding tax, interest and a 10% penalty. 45,000 people made disclosures raising over £400M at a cost to HMRC of £6m. The overwhelming majority were accepted without any enquiry by HMRC.
HMRC are now pursuing those individuals who did not make a disclosure where HMRC has information on accounts held by them. Criminal prosecutions may also arise.
More Information for HMRC
In March 2009 the First-tier Tribunal approved HMRC demands for information from four more financial institutions, and on 12 August 2009 HMRC received approval to approach a further 308 institutions. HMRC will soon have a vast amount of information about offshore assets of UK individuals.
Information has been obtained via the German Revenue of accounts with a Liechtenstein bank and an agreement was reached with the government of Liechtenstein in August 2009 which has led to the Liechtenstein Disclosure Facility. In addition Tax Information Exchange Agreements with offshore territories means that in specific cases HMRC can obtain information from institutions in these jurisdictions.
The New Disclosure Opportunity
In the Budget on 22 April 2009, the Chancellor announced a New Disclosure Opportunity (NDO) running from 1 September 2009 to 12 March 2010. It was billed as a last opportunity for people with untaxed income and gains to come forward.
The penalty level under the NDO will be 10% of the affected tax/NIC for those who had no previous opportunity to disclose. For those who were approached under the 2007 facility but chose not to disclose the penalty will be 20%. The maximum penalty in normal circumstances is 100%.
The NDO will use a similar approach to the 2007 ODF. People must first have registered their intention to make a disclosure by 4 January 2010. If they wish to disclose on paper they must calculate the tax and make a payment to cover the tax, interest and the penalty by 31 January 2010. On line disclosures must be made by 12 March 2010. Taxpayers must also certify the disclosure is complete.
What Next?
- HMRC have published details of the process to be followed. See their website
http://www.hmrc.gov.uk/offshoreaccounts/offshore-ndo.htm
- Taxpayers had to decide before 4 January 2010 whether they wanted to make a disclosure.
- Professional advice will probably be needed to quantify amounts and to help make the disclosure.
Frequently Asked Questions
Please click here to view FAQs regarding the New Disclosure Opportunity.
Please call Iain Macleod on 07920 146800 for a free confidential discussion or email imacleod@edftax.co.uk.
