Alex Radford, of English Speaking Lawyers, DeCotta McKenna y Santafé, highlights recent tax changes:
Overseas Tax Amnesty – The Offshore Disclosure Facility
The ongoing investigation by HM Revenue and Customs (HMRC) into undeclared interest on offshore bank accounts has taken a new turn. The HMRC are now proposing an amnesty to those who have evaded tax on interest on offshore bank accounts that would encourage them to come forward and admit the error of their ways.
The unprecedented initiative follows recent legal rulings that have forced five high street banks – Barclays, HSBC, HBOS, Royal Bank of Scotland and Lloyds TSB – to divulge information on clients with overseas accounts.
The two most important facts to bear in mind with regards to the overseas tax amnesty are:
1. It is not a tax amnesty;
2. It doesn’t just affect overseas tax.
Basically, UK resident individuals and companies with undisclosed interest-bearing offshore accounts will be given an incentive to come forward, under the disclosure initiative that will be launched by HMRC. It is important to note that to take advantage of the amnesty a full disclosure of all undeclared liabilities, not just those connected with an offshore account, will need to be made.
The main incentive is a promise by HMRC that the penalty charged on undisclosed tax will be limited to 10 per cent of the amount due, instead of a maximum of 100 per cent. However, taxpayers will be expected to make full payment (by 26th November 2007) of all unpaid taxes over the past 20 years, together with interest.
The offer is only open for a short period, with payments due by November 2007. The offer is accompanied by a warning of much harsher treatment if individuals fail to come forward voluntarily. Penalties will then be at least 30 per cent and could be significantly higher.
The initiative will affect individuals holding accounts in many offshore jurisdictions, such as the Channel Islands. But holders of Swiss bank accounts will not lose their anonymity because the banking secrecy laws inhibit HMRC´s ability to extract information. Individuals targeted by this initiative range from people who have unwittingly breached the rules to
fraudsters and money launderers. They include people with overseas holiday homes and people who have earned money overseas.
The advantage to HMRC is that if a large number of people do come forward voluntarily this will save its investigation teams from being overwhelmed by the large volume of data generated by the disclosure orders against the high street banks.
It is worth bearing in mind that individuals with complex affairs would get more legal protection if they made a disclosure outside the scheme. Although penalties for undeclared tax can be as high as 100% of the unpaid tax, this level of penalty is rare where the taxpayer takes proper professional advice and makes full and timely disclosure to HMRC, particularly if the disclosure is voluntary and not as a result of an enquiry.
Furthermore, it does not promise immunity from prosecution. Although taxpayers who come forward voluntarily are relatively unlikely to be prosecuted for tax evasion, anyone who has acted fraudulently or hidden large sums may be vulnerable.
In addition, if the capital has come from undisclosed UK or overseas income arising from, say, trading activities then it will be practically impossible to make a full disclosure for the last 20 years within the set time limit and paying the undeclared tax by the 26th November may prove equally problematic. Taxpayers in this situation who wish to take advantage of the amnesty will obviously need to contact their professional legal & financial advisors as soon as possible.
Alex Radford is an English Solicitor and registered Foreign Lawyer with DeCotta McKenna y Santafé. If you hold property or assets in Spain and want information or advice on your tax and fiscal obligations contact DeCotta McKenna y Santafé, with offices across Southern Spain & Tenerife.
Head Office Spain:
Mijas Costa (Málaga)
Tel.: +34 952 931 781
E-mail: enquiries@decottalaw.net
In addition, for more information on the amnesty, the full terms and details, as well as information on how to legitimately hold offshore deposits then please also contact
Jack Ross
Chartered Accountants
Tel (UK): 0161 832 4451
Web: www.jackross.co.uk
