Tax Amnesty discussion

PricewaterhouseCoopers forcefully make the point that this is NOT an amnesty from prosecution. MSE Wendy may want to change her choice of wording. This is PwCs view:

"Date Published: 17/Apr/2007
Countries: United Kingdom
The introduction of a one-off offshore disclosure facility primarily to enable people who have undisclosed offshore bank accounts to make them known voluntarily in return for reduced penalties provides taxpayers with an opportunity to ensure their tax affairs are in order. While many people may refer to this as an amnesty it is not: there is no immunity from prosecution and all tax and interest must be accounted for. Although the primary targets of HMRC's initiative are offshore accounts, anyone making a voluntary disclosure of past tax irregularities can expect similar treatment. All of this follows recent action by HMRC using powers under TMA 1970 s20(8A) to obtain information from major UK banks. PwC has set up a 24 hour helpline for taxpayers who would like to discuss what HMRC's initiative means for them.


Any taxpayer wishing to disclose voluntarily under a new process announced by HMRC today, 17 April 2007, must notify HMRC by 22 June 2007. They must then quantify their disclosure before 26 November 2007, submit tax, interest and penalty calculations and pay in full. HMRC reserves the right to check the accuracy of the disclosure later, particularly when further offshore bank account details become available. Taxpayers will know whether or not their disclosure has been accepted by 30 April 2008 at the latest.

Stephen Camm, tax partner at PwC UK, advises taxpayers to use this opportunity to ensure their tax affairs are in order, he said:

“Taxpayers need to understand that if they have an undisclosed offshore bank account, it will be discovered. This opportunity for reduced penalties is very unlikely to be repeated. It is a chance for taxpayers to avoid much higher penalties than the fixed 10% penalty being sought here. For example, if a taxpayer has a £50,000 tax bill they will pay a £5,000 penalty under this facility - a saving of £10,000 or more on the penalty normally charged."

Evidence of HMRC’s determination to gather details of offshore bank accounts using the power to obtain third party information under section 20(8)(A) of TMA 1970 was apparent as key Special Commissioners’ decisions were published last year, the latest of which noted HMRC was targeting an estimated £281m of unpaid tax, interest and penalties (see HMRC seeks £281m tax, interest and penalties from customers of four high street banks and below for further details). HMRC now estimates that it will ultimately gain access to up to a million offshore bank accounts and that hundreds of thousands of these will not have been disclosed for tax purposes. It estimates that it is likely to collect more than £1bn in unpaid tax, interest and penalties.

However, although the primary targets of HMRC’s initiative are offshore accounts, anyone making a voluntary disclosure of past tax irregularities can expect similar treatment. The initiative covers all taxes.

Steve Camm adds:

“There is a balance, however, to be struck by HMRC between offering adequate incentive to encourage disclosure and not alienating legitimate taxpayers. While many people may refer to this as an amnesty, it is not. There is no immunity from prosecution - for organised crime for example - and all tax and interest must be accounted for."

Some taxpayer scenarios

Scenario 1: Untaxed income/profits put into an offshore account

Mr S has deposited undeclared business profits totalling £20,000 into his offshore bank account in Jersey each year for ten years (£200,000 in total) and has received £30,000 interest over the years. He has never informed HMRC about this money. He has a potential income tax liability of £92,000 as a higher rate taxpayer.
Does he need to disclose? Yes - all the deposits and the interest are taxable.

Penalty under normal circumstances £27,600 or more (30%+ of tax)
Penalty within the offshore disclosure facility £9,200 (10% of tax)
Saving £18,400 or more (20%+ of tax)

Scenario 2: Non-UK domicile who doesn’t remit offshore account interest

Mr E has received £2,000 interest gross in an offshore account in Switzerland which has been kept in Switzerland.
Does he need to disclose? No - Mr E is not domiciled in the UK and has not remitted the interest, so he has no UK tax liability on it.

Scenario 3: Untaxed interest of £1,000 or less in an offshore account

Mr T, a higher rate taxpayer, has received but not declared, £1,000 interest gross from an offshore account he has held in Spain over several years.
Does he need to disclose? Yes - the interest is taxable.

Penalty under normal circumstances £120 (30% of tax)
Penalty with the offshore disclosure facility £nil (below de minimus limit for penalties)
Saving £120

Background to offshore disclosure facility

The Chancellor of the Exchequer provided the Inland Revenue with £66m in extra funding for three years in the Spring 2003 Budget. Under the heading of ‘Spend to Save’, these funds were used to tackle specific forms of non-compliance and tax avoidance. The Inland Revenue was given a target to deliver an additional £1.6bn yield. One of the four main areas to receive extra funding was the Special Compliance Office (SCO), where the Offshore Funds Project Group (OFPG) was formed mainly to recover tax evaded by individuals who have used offshore trusts to conceal untaxed profits.

In the 2004 Budget, the Chancellor announced a further package of compliance measures that allowed the Inland Revenue to build on the work started in 2003. In total, funding of £115m was committed in expectation of a yield of £2bn.

By the time of the publication of HMRC’s 2004 Spring Departmental Report, the Inland Revenue reported that SCO’s new teams had already recovered several millions of pounds in previously evaded tax and that it was on course to meet its targets.

Evidence of HMRC’s determination to gather details of offshore bank accounts using s20(8)(A) TMA 1970 power (a wide-ranging third party information power used only in significant cases to obtain details relating to a class of taxpayers where tax loss is suspected) was apparent as key Special Commissioners’ decisions were published:

SpC 517 HMRC Commissioners v Financial Institution: details of customers with a UK address who held credit cards linked to offshore bank accounts were accessed by HMRC, which estimated that tax of up to £347m would be collected on undeclared interest and the untaxed profits and gains that funded the accounts. The institution was given 60 days to provide six years' information. (See HMRC access to offshore bank account details: action after landmark decision)
SpC 536 HMRC Commissioners v Financial Institution (No.2): it was found that a UK bank had possession of its offshore subsidiaries’ banking records for UK-based customers and so was obliged to provide these to HMRC. (See HMRC's further success on UK individuals' offshore bank accounts).
Financial Institution No.1 SpC 2059/06, Financial Institution No.2 SpC 2060/06, Financial Institution No.3 SpC 2058/06 and Financial Institution No.4 SpC 2061/06. Four legal decisions set out how HMRC has gained access to computer-held details of non-UK accounts held by UK customers of four financial institutions. In doing so, HMRC presented evidence to support a claim that it will collect £281m from many thousands of people with hidden savings. It also presented evidence to show that in many cases the source of offshore account deposits is undeclared income and gains. (See HMRC seeks £281m tax, interest and penalties from customers of four high street banks).

Further information

Details of the Offshore Disclosure Facility are available on the HMRC website: click here.

PwC has set up a 24 hour helpline (0800 328 8215) to help taxpayers who would like to discuss what HMRC’s initiative means for them. "

What people should never do is to deal only in cash, convert it to Gold Coins or small Ingots and store them in a safe or safety deposit box.

That would be wrong and you shouldn't even think about it.

You should declare everything to the Revenue like good citizens and have a nice warm feeling knowing that having worked hard to earn the money whilst being taxed, you then saved whilst it was taxed, you paid VAT and Stamp Duty on your major purchases only to invest abroad paying various local taxes in a bid to secure a further, often retirement, income on which you then pay taxes back to the British Gov and if you try and save that, well they'll tax you again.

Death and Taxes !

Avoid tax, spend it or die, decisions decisions.

And yes of course I know Tesco often moan when paying for shopping with a 10 gram gold bar.

Just looking for people's view on my likelihood of getting caught with teh following:

I am non domiled. In 1999 /2000 I was paid by my employer offshore for time spent working abroad. This is a legit tax avoidance trick. It was about £6000 I think. Can't really remember.

Then in 2001 I bought a house in the UK and transfered the money - all but £100 - into the UK. I didn't think about it until about a year or so later when I realised I wasn't allowed to do that wihtout paying tax. What I don't know is whether I wasn't allowed to bring in the total amount without paying tax or just the interest so I don't know how big my boo-boo is.

The account lay dormant for 6 years and was recently closed down. The £100 was paid into my UK bank account. Pat of this of course was interest.

So I know I've been a bad girl and am now worried that I woudl have to pay 40% tax on the entire amount, which could not come at a worse time as I don't have it!

So my questions are:
do I owe tax on all the amount or just the interest?
what are the chances that I will be investigated as it is more than 5 years ago and I am non-domiciled and teh accoutn doesn't exist anymore. Slight fear that the £100 transfer due to closure of account might trigger something.

If I put the £100 into my 2006-2007 return, which I am happy to do, will that waken sleeping dogs?

Any thoughts welcome!

I'm really muddled now! I have had a holiday home in Spain for 9 years and have always paid the taxes over there which were due, including implied rentals, although we never did rent. Unfortunately my husband died and I am now considering advertising the apartment for rent, so I can pay for it's upkeep.

I have spoken to several people. Some say they declare their income and pay tax in the UK, not in Spain. Other people have told me that I have to pay in Spain. It would be far easier for me to do it in the UK as I can understand the forms!!

What should I do?