THE NEW AMNESTY (NDO) AND TAX HAVENS

Tax Haven Attack

The Organisation for Economic Corporation and Development (OECD) named those Countries which after the G20 Meeting had not made any effort to adhere to the International Standards as regards exchanging tax information.

The blacklist included Costa Rica, Malaysia, The Philippines, Uruguay, Panama and Samoa.

A grey list was also published as to those Countries that had “committed to the International Agreed Tax Standard but has not substantially implemented the requirements”.  The list included Belize, Cayman Isles, Belgium, Gibraltar, The Dutch Antilles, Singapore and Switzerland.

A further list of some 40 Countries including Britain, China – in the main, Russia, France, Germany and the USA have substantially implemented the requirements.

Some of the Countries named on the grey list have complained as to their inclusion stating also that certain tax friendly USA States had not been put on the list either. 

New Disclosure Opportunity

HMRC have now confirmed that they are following up their Offshore Disclosure Facility from 2007 with a new a Disclosure Opportunity (NDO). 

Paper Registrations will commence 1st September 2009 for a period ending 30th November 2009.  Registrations made electronically can be made from 1st October to 30th November 2009.

Full details of any Disclosure must be made by 12th March 2010 together with any payment due.  For Disclosures not filed electronically i.e. paper Disclosures the relevant date is 31st January 2010.

The penalty is to be fixed, as before at 10% of the tax due.  However, for tax payers who were offered the chance previously to disclose and had Accounts at Barclays, HBOS, Lloyds, RBS or HSBC and did not declare the penalty will be 20%.

Non Disclosure under the Amnesty will trigger a minimum interest payment of 30% and could rise to 100% with the possibility of a Criminal Prosecution. 

This coupled with HMRC’s new powers to turn up at tax payers premises unannounced is heaping the pressure on total fiscal compliance.

UK Tax Residents

If you are a UK resident, you can legitimately hold an Offshore Account but you must declare the interest each year.

Offshore Accounts are attractive because interest is paid gross and it can roll up increasing the return.

However, it should be noted that under the European Savings Directive implemented in 2005, which was to allow a free exchange of tax information as regards EU Members, certain States chose to allow account holders to pay a Withholding Tax.   Jersey, Guernsey and the Isle of Man adopted this policy.

Currently the Withholding Tax is 20% but by 2011 it will be 35%.  The penal rate of tax is so as to encourage account holders to make the correct disclosure to HMRC.

If an account holder went down this route, however, and allowed the Withholding Tax to be deducted, then the relevant Authority would not make any disclosure i.e. the account would remain anonymous. 

Countries that accepted the OECD Standards have to set up a TIEA – Tax Information Sharing Agreement.

The successful current negotiations between Lichtenstein and the UK, where the principality agreed to co-operate with the UK, where we understand accounts will be closed for UK citizens who do not come forward voluntarily, is something which may be adopted more widely going forward.  

WHAT DOES THIS MEAN?

There are going to be more problems on the way for UK citizens holding funds Offshore who are not making Returns to HMRC on an annual basis.

In the Offshore Disclosure Facility of 2007 our Tax Department successfully advised and submitted a substantial number of Reports.

For genuine advice or a second opinion please contact Brian Sochall on 020 7291 1000.