Five Facts About HMRC’s Offshore Tax Amnesty

HM Revenue and Custom’s taxation amnesty, or ‘New Disclosure Opportunity’ (NDO) starts tomorrow – the 1st of September 2009 - and it will run until the 12th of March 2010, thus presenting a very narrow window of opportunity for anyone affected by the terms and scope of the amnesty to get their affairs in order.

If you’ve been living abroad and are now back in the UK with offshore accounts still overseas, or if you’re a UK resident with offshore savings and investments and you’re worried about whether you’ve been reporting your affairs correctly, this report is for you.

We’re going to details the five most salient facts about HMRC’s offshore tax amnesty so that you can make sure all your fiscal arrangements are legitimately secured and reported to the right authorities.

Fact One – If You Have a UK Address and an Offshore Account You Need to Know About the Offshore Tax Amnesty!

Whilst the first tax amnesty that HMRC ran only focused on five main high-street banks in the UK with offshore subsidiaries, this NDO is targeting UK residents who have offshore accounts operated by approximately 250 banks and other financial institutions which also have an onshore presence in the UK.  Therefore, if you’re tax resident in the UK and have an offshore account that you have never disclosed to the taxman, you could well come under scrutiny.

Fact Two – There’s Nothing Wrong With Having an Offshore Bank Account

Many Britons who own property abroad, travel regularly, work overseas or who have lived abroad have perfectly legitimate offshore bank accounts.  What’s more, British residents can sometimes benefit from offshore savings and investment solutions too.  It is not illegal, immoral or wrong to have offshore assets – what is incorrect is failing to disclose your offshore interests when you have an obligation to do so.

In addition to this, the tax amnesty that starts tomorrow is not just interested in those who have an offshore bank account with a lump sum in it that’s earning interest on which tax should be paid!  HMRC is potentially interested in those who have bought a property abroad and are earning a rental income from it, those with a lump sum they have perhaps squirreled away offshore without having paid capital gains tax on it and any money that may be ‘hidden’ and have come from an untaxed source illegitimately.

Fact Three – Ignorance is No Excuse

Some people are unaware that money they have earned abroad may have a taxation charge in the UK.  For example, some people who own second homes, who have purchased them with taxed income but who are now earning an income from their property may not realise they have a potential tax obligation in the UK.  However, HMRC will not accept your ignorance as an excuse for not paying taxation!  Therefore, if you’re not sure about your tax position you have to speak to an accountant as soon as possible – you only have until March the 12th 2010 to sort out your tax situation with respect to overseas or offshore held financial assets.

Fact Four – You Can Get Help Sorting Out Any Mess

There are people out there who can help you – from financial advisers who can correctly advise you about where to legitimately invest your money for the best potential returns, to accountants who can help you sort out your taxation obligations.  HMRC also offer plenty of information on their website to assist you, and finally, don’t leave it too late to seek help if you are even only a tiny bit concerned about your position and your status.  It is better to get everything clarified and confirmed than to lie awake at night worrying or to miss the deadline and realise you have tax and a huge fine to pay.

Fact Five – Making a Disclosure

If you do have to make a disclosure here are some pithy facts about the process: -

The HMRC offshore tax amnesty basically means that instead of penalties of up to 100% of the tax owed on top of the tax owed being charged to affected individuals, most people who make a disclosure by the deadline will ‘only’ pay a penalty of just 10% along with the missed tax and interest.


In some cases, such as where HMRC has already sent an individual a letter about their tax affairs, a penalty of up to 20% may be charged

If the tax you owe is less than £1,000 then penalties may be waived although interest will be charged in all cases, and tax owed will have to be paid in full.

Get a ‘DRN’ or Disclosure Reference Number from HMRC by registering with them between the 1st of September 2009 to the 30th of November 2009.  Obtaining a DRN does not commit you to making a disclosure report if you subsequently establish that there is no unpaid tax.

Please note that complete payment of all tax, interest and penalties needs to be made in full at the time you submit your disclosure report.  If you will have difficulty making a full payment then you are advised to contact HMRC to discuss payment arrangements as soon as possible.

Penalties for an incorrect or incomplete disclosure are likely to be at least 30% and could be higher - and of course there remains the possibility of criminal investigation if you continue to evade or avoid taxation.