The deadline for the first step in taking advantage of the HMRC offshore tax 'amnesty' is 22 June 20...
The deadline for the first step in taking advantage of the HMRC offshore tax 'amnesty' is 22 June 2007, and people with undeclared tax liabilities on interest from non-UK banks will now be thinking about whether or not to make a disclosure to take advantage of the opportunity to pay only the tax, interest and a low penalty of 10% of the tax due.
People particularly likely to make a prompt disclosure are those whose UK banks have told them that a disclosure in respect of a foreign bank account has already been made by them. Waiting to be investigated rather than volunteering to pay the tax means that a greater penalty can be expected - up to 100% of the tax depending on circumstances.
Conversely, someone with undisclosed offshore bank interest who has not been told of a bank disclosure shouldn't assume that they are safe from further action.
For one thing, some banks may not consider that it is appropriate to write to customers about a disclosure. For another, the Revenue probably hasn't finished its information gathering exercise.
The main message is 'if in doubt, disclose', and this shouldn't be confined to undisclosed bank interest. The Revenue has said that people who take this opportunity to approach their tax office about other sources should get the same treatment.
One caveat to disclosure is that the 10% penalty will not be the end of the story for 100% of people. The Revenue expects the vast majority of disclosures to be accepted, but more severe action, possibly even prosecution in extreme circumstances, might be considered in some circumstances, including where the disclosing individual is particularly high profile or in a position of financial responsibility, such as an accountant, solicitor, financial adviser, or where the disclosure was incomplete.
Where an adviser is told by a client that they will be making a disclosure and spots circumstances that suggest a higher penalty than the 10% minimum, good advice to give the client is to get professional help when making the disclosure.
A specialist tax adviser can help the client understand the impact that factors like co-operation can have in influencing the final penalty, as well as helping with negotiation of affordable settlement terms in cases of financial hardship.
Moving on from the disclosure itself, where the settlement is likely to leave the client with funds in hand, an advantage of the adviser knowing about a new source of capital is that this capital can now come within the advice process.
Filtering the money gradually into cash Isas may not sound exciting but would put the money into an environment where gross interest is a legitimate and permanent outcome. Bond investments - particularly offshore bonds - should also be considered, because these would offer the possibility of income tax deferral and possible IHT mitigation depending on the client's circumstances n
Margaret Jago is technical manager at Aegon Scottish Equitable International
The increase in minimum AE contributions has had little impact on opt-out rates - with cessations after April increasing by less than two percentage points, data from The Pensions Regulator (TPR) shows.
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