Tax & Accounting News

Tax Amnesty Confusion

10/11/2009

As the government’s New Disclosure Opportunity (NDO) for people with undeclared assets overseas and the separate amnesty for people with holdings in Liechtenstein both get under way, there are reports of confusion among some individuals about which amnesty to use, if their holdings fall under both categories.

The terms of the Liechtenstein deal are more generous than those of the NDO, particularly the requirement to only make disclosures covering the last 10 years, compared to 20 under the NDO.

This opens up the intriguing possibility of individuals shifting money from other offshore locations into Liechtenstein in order to reduce the tax they would otherwise pay. While anyone doing that now would not be able to participate in the amnesty immediately, current guidelines from HM Revenue and Customs (HMRC) suggest they would be able to from 1 December.

But there also remains the possibility that the UK government will sign similar unilateral deals with other tax havens, again with less onerous rules than the NDO. Anyone ending up using two different amnesties to declare the same funds twice is likely to face all manner of confusion with HMRC, but the situation remains uncertain, which may be why the NDO has apparently got off to a slow start.

On a separate issue, HMRC has confirmed that anyone who did not pay tax as a result of an ‘innocent error’ – specifically if they received incorrect advice or suffered bereavement or serious illness – they will not have to pay the 10% fine due under the NDO. However, ignorance of the tax rules will not be accepted as an excuse.

We will of course keep our clients updated as the situation hopefully becomes a little clearer.

Meanwhile HMRC's permanent secretary for tax, Dave Hartnett, has made his debut on the YouTube website, again emphasising to UK citizens with offshore accounts that the NDO represented one last chance to declare their assets. He said anyone who subsequently evaded tax on their offshore holdings would be found out and could be prosecuted.