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Offshore bank accounts: The next step

13 January 2010

With the deadline for voluntary disclosure under HM Revenue & Custom's (HMRC) Non-Disclosure Opportunity (NDO) having now passed, any undisclosed offshore bank accounts could now attract greater penalties.

In addition, the Government is currently consulting on two further measures with which to punish individuals who have not taken advantage of the NDO.

The Government’s overriding principle is that any offshore non-compliance equals tax evasion.
Its first proposed measure is to bring forward legislation so that all offshore non-compliance (subject to a reasonable excuse exception) will attract the same penalty regime as deliberate non-compliance attracts in domestic matters.

This means the following penalties would apply:

The Government’s second proposal is that all new offshore bank accounts in certain high-risk jurisdictions (i.e. those with no information exchange agreements with the UK) would need to be notified to HMRC.

In addition, any new bank accounts that have a balance of more than £25,000 in certain other jurisdictions would also need to be notified. However this requirement does not apply to those taxpayers paying tax on the remittance basis.

The penalties for non-compliance would be a £100 fixed penalty, followed by a period of daily penalties, followed by tax-geared penalties of up to 100% of the tax due.

Draft legislation is due to be published shortly which will provide further detail.

However penalties under these two new measures when taken together could total 200% of any tax due, which is a significant increase on the current position and another indication of HMRC’s increasingly hard-line stance to what it perceives as offshore tax evasion.

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