People who have money in offshore accounts but have not disclosed the tax that may be owing are being given a second and final chance to settle their bills at a reduced penalty rate.
HM Revenue and Customs (HMRC) launched its first “amnesty”, or Offshore Disclosure Facility (ODF), in 2007 and recouped some £400 million in unpaid taxes from 45,000 people holding undeclared offshore accounts with five leading banks.
Now HMRC has extended its investigations to include a further 300 UK and foreign owned banks.
As a result, it has launched a New Disclosure Opportunity (NDO).
Under the scheme, people who contact HMRC voluntarily will only face a penalty charge on undeclared, unpaid taxes of 10 per cent of what is owed.
In principle, HMRC are entitled to impose a fine of 100 per cent but is hoping that, as in 2007, the reduced penalty will encourage more account holders to come forward.
Higher rate taxpayers with offshore savings accounts need to pay 40 per cent tax on the interest that is generated, irrespective of whether the money is re-introduced to the UK. Basic-rate taxpayers must pay 20 per cent.
HMRC is also tracking tax owed on other assets such as holiday homes which have produced income from lettings.
To qualify for the capped penalty, taxpayers must contact HMRC between 1 September and 30 November to notify that they owe undeclared tax. Those notifying on paper can do so from 1 September to 30 November and those notifying electronically from 1 October to 30 November.
Anyone making an offshore disclosure on paper must get it to HMRC from 1 September 2009 to 31 January 2010 at the latest. Electronic disclosures can be filed from 1 October 2009 to 12 March 2010.
However, HMRC went on to say that people who were contacted during the 2007 amnesty, did not come forward then but do so now will have to pay a penalty of 20 per cent.
Those who continue to fail to declare their liabilities will face penalties from 30 per cent up to 100 per cent.
Stephen Timms, Financial Secretary to the Treasury, said: “I would urge anyone with offshore accounts holding untaxed income or gains to take advantage of this simple and straightforward scheme.
“Most offshore investors already pay the tax that the law requires and it’s only fair that everyone respects the rules.”
Dave Hartnett, HMRC’s Permanent Secretary for Tax, added: “I know there are people who regret not taking advantage of our Offshore Disclosure Facility (ODF) in 2007 which focused primarily on the customers of five large banks.
“Now everybody who has not paid the tax they should in relation to offshore accounts or assets has this New Disclosure Opportunity to pay what they owe with penalties on more favourable terms than normal.”
Mr Hartnett described the disclosure procedure as simple and straightforward but warned that this would “the last opportunity of its kind”.
Chas Roy-Chowdhury, head of taxation at the Association of Chartered Certified Accountants (ACCA), believes that HMRC will push hard to reclaim any taxes owing.
He said: “HMRC will dig a lot deeper if people do not disclose their income details or monies held in offshore accounts. It has the legal power to seek information from banks, so this really is the time to disclose, or face a penalty.
“As the country’s tax take is down, HMRC will be looking to pursue tax evasion in a more aggressive and structured way. This new initiative is a good use of HMRC’s resources.”