Hong kong skyline black & white

he deadline for individuals to notify HM Revenue and Customs (HMRC) about previously undisclosed offshore accounts passed at midnight on January 4 meaning those that failed to disclose now face investigations and penalties of up to 100%. However, in spite of the prospect of financial and criminal penalties, PricewaterhouseCoopers predicts that only 13,000 individuals took the opportunity to register under the NDO scheme - well under half the number who took advantage of a similar amnesty in 2007.

“In 2007 around 40,000 people registered under the Offshore Disclosure Facility and HMRC raised approximately GBP400m. We predict that around a third of that number have come forward this time under the New Disclosure Opportunity and that HMRC is likely to collect around GBP135m,” commented Stephen Camm, tax partner at PwC.

Under the NDO, people making a complete and accurate disclosure of their untaxed offshore liabilities between September 1, 2009 and March 12, 2010 will have any penalty capped at 10%, or 20% if they failed to take up a written offer of a capped penalty under HMRC’s 2007 Offshore Disclosure Facility.

Hong kong skyline black & white

Hong kong skyline black & white

Hong kong skyline black & white

Hong kong skyline black & white

Hong kong skyline black & white

Hong kong skyline black & white

Hong kong skyline black & whitr

Hong kong skyline black & white

Hong kong skyline black & white

Poor advertising of the NDO by HMRC has been cited by some as a reason why there was relatively little interest in the scheme. However, the more favourable terms of a parallel offshore amnesty targeting those with financial arrangements in Liechtenstein, known as the Liechtenstein Disclosure Facility (LDF) is thought to be a major reason why offshore account holders have largely shunned the NDO.

John Cassidy, Tax Investigations Partner at PKF Accountants & business advisers observed: “Individuals registered to use the NDO will have to come clean about undeclared income over the last 20 years. However, if the LDF route is used it is a much shorter period of around 10 years. Because the difference in the number of years involved is so stark, the tax – and interest - saved can be significant.”

The LDF, the result of an agreement between the UK and Liechtenstein last summer, also caps penalties at 10% and allows account holders to make a full disclosure of their financial arrangements in the Principality until March 31, 2015. It is also still possible to register for the LDF, and those who have already registered for the NDO can also transfer to the Liechtenstein scheme, Cassidy noted.

PKF points out that if an individual had GBP1m of clean funds deposited overseas at the start of the tax year 1990/91 and it earned interest at a steady 5%, the tax and interest and penalty charges owed to HMRC under the NDO would be around GBP967,000, whereas under the LDF they would be just GBP493,000 - a saving of GBP473,000. Additional savings could be made if the original capital in the account has not been taxed or inheritance tax is outstanding.

Moreover, Cassidy remarked that it was an “absolute myth” that a Liechtenstein bank account is needed in order to benefit from the LDF.

“An interest in relevant property in Liechtenstein can be acquired now and the benefits of the LDF obtained. There are, of course, other variables to properly consider for each individual before determining whether the LDF is viable but, in the right circumstances, the potential savings are significant,” he concluded.{{desc}}