Offshore Disclosure Facility - The Tax Amnesty Has Arrived………..Or Has It?
Over the last year there has been huge speculation in the offices of tax advisers that HM Revenue & Customs were about to launch an amnesty for certain classes of taxpayer. This follows success by HMRC in obtaining substantial information about UK citizens holding offshore bank accounts. Well that speculation is over but those of you who saw the News item on ITV may be forgiven for wondering who the amnesty is aimed at.
The HMRC website has removed the doubt but is careful not to talk in terms of an amnesty but an Offshore Disclosure Facility (“ODF”). An initiative aimed only at those with investments held offshore where a reduced penalty can apply to those looking to come clean. There are deadlines to take note of. The initial outline disclosure has to be registered by 22 June 2007 and the substantive report and payment by 26 November 2007.
There is an online booklet at https://disclosures.hmrc.gov.uk to explain the ODF processes. It all looks very simple. Disclosure by numbers almost. However, what it doesn’t help with is where there has been a previous enquiry and the offshore issues were deliberately omitted or where someone who sits squarely within the HMRC Criminal Investigation Policy wants to come forward. Well, it does have a comment but only to the effect that disclosures in those cases “are unlikely to be settled through this facility”.
There is another barb that HMRC customers may think obvious but that many will still get wrong and that is where they make only a partial disclosure. The error would be in believing that they only have to disclose the information that HMRC have suggested they know about, ie the offshore investments of the High Street banks and therefore omit any disclosure of other offshore assets, UK based problems such as property, onshore bank accounts, even taxable benefits. They may not get caught out right away but if in years to come it becomes apparent that the disclosure through ODF was limited and materially inaccurate then prosecution may well follow.
It is in these circumstances that the taxpaying public probably need help the most. Help from themselves. A big player with previously undisclosed offshore funds may well have had attention from the taxman before. If he or she had signed off the previous enquiry without disclosing existing offshore funds then prosecution is likely.
If the new ODF disclosure involves false or forged documentation, conspiracy or money laundering then it is going to be considered for prosecution. If the person making the new disclosure is a professional such as an accountant, financier or solicitor HMRC would be very much concerned not to accept a simplified solution for that person and would, in all probability consider prosecution.
Now there are ways of working around this without any guarantee of success but alternative steps do need to be considered first to avoid the certainty of being a candidate for the Criminal Directive.
To return to the prospect of an incomplete disclosure, this is likely to be the predominant concern. Only a sample of ODF disclosures will be audited but no-one should take comfort that theirs won’t be the one that is checked. As above, at some future date new intelligence may emerge and damn the offender again but this time without a prospect of a reduced penalty.
No matter how simplified the procedure appears it has to be got right. Historically, the making of an HMRC disclosure through a report process would take a minimum of 6 months but in more complex cases over a year. Trying to push them all through by the end of November may leave many questions open at the point of submission of the final report. Advisers and taxpayers should exercise extreme caution that they are not pressurised into submitting a report too early and then get it wrong.
Yes it is good news that there is an amnesty of sorts. But do take care that a casual approach doesn’t spoil the chance of settling up with a reduced penalty and getting a 7 o’clock knock from the taxman instead.