p.12 talking shop 9:FOOTWEAR NEW TEMPLAT 10 08 04/09/2009 09:10 Page 12
TALKING SHOP
Taxman offers last chance to come clean
H
M Revenue and Customs has recently announced a sec-
SIMPLE PROCESS FOR MOST
ond tax amnesty. Under the New Disclosure Opportu-
The process is expected to be straightforward in simple cases.
nity, to give the process its correct name, the taxman
But there will be many pitfalls for the unwary or those with
will be seeking tax on undeclared liabilities, interest
complex tax affairs. A badly-managed disclosure under the
and, in most cases, a penalty. The NDO is an extended version
NDO can lead to higher penalties or, potentially, prosecution.
of a similar facility previously offered by HMRC. Under the
Ordinarily, a taxpayer would have to endure a lengthy in-
Offshore Disclosure Facility in 2007, HMRC approached five
vestigation when their affairs are being examined by the tax-
banks for information on its customers. This time around, the
man. The average duration of a typical enquiry is around 18
taxman is obtaining information from 200+ banks, building
months. An advantage of coming forward under the NDO is
societies and financial institutions.
that the taxpayer will avoid that level of intrusion, and pro-
The NDO is a time-limited process for taxpayers with a dis-
fessional fees for sorting the problem out should be lower. It
closure connected to an offshore account or asset to come
is inevitable that some of the disclosures made under the
forward to the taxman. It is anticipated that taxpayers with ir-
NDO will be subject to scrutiny by the taxman, but those who
regularities solely connected to UK accounts or assets will
have made a full disclosure have nothing to fear.
PHIL BERWICK
also be able to secure similar settlement terms.
NOT JUST ABOUT BANK INTEREST
FIXED PENALTY TO APPLY
Under the terms of the NDO, taxpayers will not pay a penalty
The disclosure process is about more than just tax on bank
if the liability is less than £1,000. Where the liability is £1,000
interest. Anyone coming forward must tell the taxman about
or more, taxpayers will pay a fixed penalty of 10% of the tax
all irregularities, including those not connected to the offshore
due. However, those taxpayers with undeclared accounts with
account or asset, for up to the last 20 years. Failure to make a
Barclays, HSBC, HBOS, Lloyds, or RBS, who were offered
full disclosure to the taxman can result in, at best, a substan-
the opportunity to disclose under the 2007 Offshore Disclo-
tially higher penalty, or, in the most serious cases, prosecution.
sure Facility, will be charged 20%. Where an incomplete dis-
Taxpayers intending to make a disclosure must notify the
closure is made, the penalty will be higher.
taxman of their intention to do so between 1 September 2009
and 30 November 2009 (online from 1 October 2009 – be-
fore that date, taxpayers can make a paper notification). De- RISK OF PROSECUTION
tail of all irregularities, and payment of the amount due, must Taxpayers should proceed with caution under the NDO if their
be made to the taxman by 12 March 2010 (by 31 January 2010 tax affairs have previously been investigated by the taxman.
for paper disclosures). This can create a problem if a full disclosure wasn't made dur-
ing the previous investigation, or where, for example, an in-
OFFSHORE ASSETS
correct statement or certificate was given to HMRC. At the end
of an investigation the taxman will ask the taxpayer to sign a
The NDO is also aimed at those with a disclosure connected
statement of all their assets. If an incorrect statement has been
to an offshore asset. When people purchase an asset abroad,
given, the taxpayer is at risk of prosecution. Similarly, if false
say land or property, often the last person they think of is the
documents, for example, invoices, have been produced to con-
UK taxman. But rental income earned on, for example, a
ceal irregularities the case would fall within HMRC's published
Spanish property should be declared to HMRC by UK tax-
Criminal Investigation policy. In either situation, specialist ad-
payers, as should any other income arising from an overseas
vice should be taken before proceeding under the NDO, under
asset. As with offshore bank accounts, the taxman is not only
which there isn't immunity from prosecution.
interested in any undeclared income. He will want to check
that the underlying asset has been purchased using funds from
known sources, and not from undisclosed income or gains. LAST CHANCE FOR TAXPAYERS TO COME FORWARD
The main examples of assets associated with the NDO are HMRC have said that this will be the final opportunity for tax
bonds or other financial products; land and/property; trusts; defaulters with overseas accounts or assets to bring their tax
business interests; and other types of assets, including yachts affairs up to date.
• PHIL BERWICK and vehicles. There will undoubtedly be taxpayers who fail to make a
Phil Berwick is a Anyone coming forward under the NDO should ensure that complete disclosure, and others who choose not to come for-
Director in the they declare not only any offshore bank accounts held, but also ward. Both categories of taxpayer can expect to hear from the
Tax Disputes and any overseas assets. It would be a serious error of judgement to taxman. It may be a while, given the volume of information
Investigation team declare the bank accounts, but not other assets, perhaps on the held by HMRC, but the taxman will be in touch. Those who
at McGrigors assumption that HMRC will not find out about them. The choose not to come forward will be charged a minimum
LLP. world has become a significantly smaller place in recent years penalty of 30% of the tax evaded, up to a maximum of 100%.
phil.berwick@ and the taxman may become aware of an overseas asset through They also run the risk of being prosecuted – a risk not worth
mcgrigors.com one of the numerous exchanges of information that take place taking, when the NDO offers a way to clean up their tax af-
with overseas tax authorities each year. fairs with the minimum of fuss.
12
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FOOTWEAR TODAY
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SEPTEMBER 2009
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