Disclose now for peace of mind

Since we reported on HMRC's New Disclosure Opportunity in the last issue, an additional disclosure facility is on offer.

The Government's attack on offshore tax avoidance continues, with two carrot and stick initiatives launched by HMRC. Its aim is to encourage those with secret offshore accounts and assets to come forward and put their tax affairs in order. The sticks are aimed at banks and financial institutions that will be forced to hand over details of offshore account holders.

You can find more details of both schemes - the New Disclosure Opportunity and the Liechtenstein Disclosure Facility on our website.

Liechtenstein option

Of the two, the Liechtenstein option offers more beneficial terms, asking for details of liabilities going back only 10 years (as opposed to 20 years for the New Disclosure Opportunity). It also offers stronger assurance against prosecution and certainty concerning the UK tax treatment of certain Liechtenstein structures - such as Anstalts and Stiftungs.

One possibility may be to combine disclosures under both initiatives. In limited circumstances account holders may not even need a current connection with the principality in order to use the Liechtenstein Disclosure Facility. 

Avoid penalties

Bear in mind neither facility amounts to a tax amnesty. Those making disclosures will be expected to pay the tax due, together with interest and penalties of 10% or 20%, depending on circumstances.  Those who decide not to come forward under these initiatives can expect HMRC to seek penalties of 70% or more if they are found out, since non-disclosure is likely to be viewed as a deliberate act. 

HMRC's Permanent Secretary for Tax, Dave Hartnett, announced recently that he expects further disclosure facilities to be agreed on a country-by-country basis in the next few years. This may prompt some account holders to wait and see.

The devil you know

But beware: the delay may simply give HMRC more time to discover irregularities by its usual means. What's more, there is no guarantee that any future agreements with offshore havens will offer such favourable terms as these two. Using the New Disclosure Opportunity to put your affairs in order may just prove to be the most cost effective option. If you wish to use this facility then you must register with HMRC before 30 November.

 Tax investigations can be very stressful for those involved. Our professional team can guide you through the process and ensure that you pay only the amount properly due. If you need help with a disclosure or wish to discuss your tax affairs confidentially, please contact your usual Littlejohn tax adviser or email senior tax consultant Barry Luscombe at bluscombe@littlejohnllp.com