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Disclosure offer should cover more taxpayers

The latest campaign by HM Revenue and Customs (HMRC) designed to encourage people with undeclared funds in offshore accounts to disclose their tax liabilities should be extended.

The Chartered Institute of Taxation (CIOT) has argued that the New Disclosure Opportunity (NDO), which will allow people to pay their undeclared taxes at a reduced penalty rate, should also include anyone with an undisclosed income rather than just those with offshore accounts.

Details of the NDO suggest that the scheme will only be open to people with unpaid tax on income generated by an offshore account or an asset such as a holiday home that has been let. Onshore income has not been mentioned.

Gary Ashford, the chairman of the CIOT’s management of taxes sub-committee, said: “The CIOT recommends that the NDO should be available to any taxpayer with undisclosed income. We consider that the NDO should apply to a level playing field.”

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.

Under the New Disclosure Opportunity, 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.