NEWS - DIRECTORS’ TAX - 23.05.2007

Offshore amnesty?

Offshore accounts. Whilst the existence of an offshore account doesn’t point to anything being wrong (you have a house overseas so why not a bank account?), the Taxman’s view is that it’s often associated with tax evasion. So he has declared an amnesty after obtaining information from banks and through the European Savings Directive about offshore accounts held by individuals and companies. Under the Directive, banks are required to tell the UK tax authorities exactly who has an offshore account (similar arrangements exist with other territories).

Undeclared income. The Taxman acknowledges that many people correctly declare the income from these accounts but he also believes that many don’t. The amnesty provides an opportunity for those who hold or who have held - directly or indirectly - an offshore account that is in any way connected to a loss of UK tax, to come forward and voluntarily disclose this information (you can do this at http://www.hmrc.gov.uk).

Mr 10%. The truth is that the Taxman has announced a special fixed rate penalty (10%) for all liabilities which are connected with a hitherto undisclosed offshore bank account provided he’s notified of the “intention to disclose” by June 22, 2007 and all tax, interest and penalties are paid over by November 26, 2007. In other words, come clean and he’ll charge you a 10% penalty as long as you pay the tax due itself plus any interest. Ordinarily, the penalty could be up to 100% of the unpaid tax. If the offshore account earns less than 2.5% interest, there will be no penalty.

Tip 1. Within the next month, it’s in your best interests to consider disclosing any offshore account that’s earned interest which hasn’t been subject to UK income tax.

Tip 2. If you do nothingyou may never hear a word on the subject from the UK Taxman but you will have it hanging over you. If he decides to chase you at some point in the future you can expect a rough time of it; penalties of up to 100% of the tax due.