TAXPAYERS who take advantage of a new amnesty on earnings from offshore investments could end up paying tax for which they are not liable, a St Neots accountancy firm warned this week. Although the arrangement is aimed at allowing such taxpayers to regu
TAXPAYERS who take advantage of a new "amnesty" on earnings from offshore investments could end up paying tax for which they are not liable, a St Neots accountancy firm warned this week.
Although the arrangement is aimed at allowing such taxpayers to regularise their dealings with HM Revenue and Customs, there is no guarantee they will escape criminal proceedings, said Richard Couchman, tax partner at Whitmarsh Sterland.
There is also a risk they could mistakenly pay tax on overseas earnings that are not imported into the UK.
The Offshore Disclosure Facility has been introduced for those who hold offshore bank accounts that have not previously been declared to the tax office.
"The new facility is not really an amnesty, since any liabilities accepted under the scheme will, in most cases, still be subject to a 10 per cent penalty plus interest.
"HMRC also reserve their right to decline any offer made under the scheme and proceed with their normal investigation procedures which could ultimately lead to prosecution," Mr Couchman said.
"Nonetheless, the 10 per cent penalty is reasonably generous given that a penalty of around 25 to 40 per cent would generally be expected in cases dealt with through the normal investigation process where there is no voluntary disclosure."
The facility is open only to those who hold or have held an offshore account which has resulted in a loss of UK tax. However, the disclosure does not have to relate solely to interest received. For example, an individual who owns a villa in Spain will be able to declare rental income as long as they also have an offshore account they have also not disclosed.
"In the absence of an offshore account a disclosure should be made to the local tax office in the normal manner. However, HMRC have indicated that if an approach is made with full payment and made under the same terms as the offshore facility then the taxpayer can expect the same treatment," Mr Couchman said.
The tax office must be notified of the intention to make a disclosure by June 22. The full disclosure and settlement of tax, interest and penalties must then be made by November 26.
"This time frame is considerably shorter than we would expect to see in a traditional investigation and may be unrealistic, particularly where copy documentation has to be obtained from third parties, such as overseas banks, which alone could take a significant period of time.
"We are also concerned that there may be some cases of disclosure made where no tax liability actually exists, resulting in an unnecessary payment of tax, for example by someone who is not UK domiciled.
"Such an individual would be liable to tax on any offshore income only if it was brought into the UK. There is a real danger that such individuals will not fully appreciate the tax laws and will pay tax that is not due."
INFORMATION: Mr Couchman is tax partner at Whitmarsh Sterland, The Shrubbery, Church Street, St Neots PE19 2HT - tel: 01480 373000; fax 01480 406124; e-mail email@example.com or visit www.whitmarsh.co.uk