New Disclosure Opportunity

The Chancellor’s Budget speech in April made reference to a "New Disclosure Opportunity" which will run from Autumn 2009; details of which have now been formally publicised. This is effectively a re-launch of HM Revenue and Customs’ 2007"Offshore Disclosure Facility" which attracted wide criticism. It secured only 40,000 disclosures from a possible pool of 400,000 pieces of information provided by the 5 major UK clearing banks about accounts held by UK residents in their offshore subsidiary branches.

It is implicit that parties who take advantage of the scheme will be immune from prosecution in relation to the tax offences they disclose. Whilst no prosecutions have arisen against parties who failed to disclose under the 2007 scheme, a rather more hard line approach can be anticipated this second time around.

Specialist legal advice should be taken by anybody who has made inappropriate claims for State Benefits whilst holding substantial offshore assets. The amnesty does not extend to offences other than tax evasion and it is possible that other Government Agencies may seek to bring prosecutions for non tax related offences.

Full disclosures are being incentivised with a 10% penalty deal extended to people who come forward, but this will not extend not to those parties who declined to disclose under the 2007 scheme having received letters directly from HM Revenue and Customs confirming that information was held about them from the five major clearing banks. A 20% penalty (which is still favourable) will apply to people whose disclosure involves the use of offshore accounts with these major banks, namely, Barclays, HSBC, Lloyds TSB, RBS and HBOS. Note that in all cases interest will be charged by HM Revenue and Customs for the late payment of tax.

Anybody who is contemplating a disclosure must register their intention to do so with HM Revenue and Customs. A full disclosure must be submitted along with the outstanding tax by the prescribed deadline which is 12th March 2010 for those who use the online facility. Whilst this may seem like sufficient time to prepare and submit the disclosure, a detailed forensic review can be time consuming. A more demanding deadline of 31st January 2010 has been set for parties who do not use the online facility.

The first step is to register your intention to make a disclosure. This can be done in writing or by telephone or online before 4th January 2010. You will not need to provide any detailed information at this point other than your date of birth and contact details and possibly your existing tax reference. A Disclosure Reference Number will be sent to you for use in all subsequent correspondence. This deadline has been extended by HMRC from 30th November 2009 in order to give the banks more time to write to customers who have offshore accounts. There is an expectation that the extension will not give the banks sufficient time but HMRC have indicated that the deadline will not be extended again.

"Hector Hector" have a great deal of experience of preparing disclosures and an understanding of what HM Revenue and Customs will find acceptable. We will ensure that the information gathering and formulation of the disclosure is properly managed and cost effective. The New Disclosure Opportunity makes provision for specialist advisors to submit the disclosure on your behalf.

HM Revenue and Customs will expect disclosures to go beyond simply detailing how much undeclared interest has been earned upon offshore bank accounts. This somewhat naive approach was adopted by many inexperienced accountants and clients in response to the 2007 facility. There will be an expectation on the part of HM Revenue and Customs that the original funds deposited offshore have not been taxed, unless evidence to the contrary exists. Significantly higher penalties will apply if disclosures made under the new scheme are shown to be inadequate. It is conceivable that prosecutions will be brought in "extreme" cases of incomplete disclosure.

Looking for evidence to support your position and delving back into history and reconstructing events can be very time consuming. Our advice is to consider your position now and consult us at the earliest opportunity. It is vital that HMRC are warned about potential payment problems before you submit your disclosure. If you anticipate being unable to settle all of the outstanding tax then you must open a dialogue at the earliest opportunity. We will be able to mediate for you in these circumstances.

Note that the scheme only applies to tax disclosures where there is an offshore aspect. HM Revenue and Customs are anxious to encourage other tax disclosures but they are at pains to indicate that the favourable terms offered here will not be made available outside the New Disclosure Opportunity. It is our opinion that this position may well be unsustainable in context of penalties for example. Specialist advice should be taken by anyone contemplating a disclosure where there are no offshore aspects.