Offshore Bank Accounts No Fines For the Innocent!

The latest, (and apparently last), tax amnesty as announced by HMRC is designed for all Britons who are tax resident in the UK to come clean about any undisclosed assets that they have and earn interest or an income from abroad and offshore.

In the first taxation amnesty, the customers of a handful of British banks who held accounts offshore were targeted, and now HMRC is attempting to clear up the sticky issue of taxation forgotten, avoided or evaded by all others who have the likes of bank or savings accounts offshore.

The bottom line is that it is not illegal to go offshore with your money – even if you reside and pay tax onshore in the UK.  What is illegal is failing to disclose this money to the taxman.  However, the good news is that there will be no offshore bank account fines for the innocent.  I.e., those who have genuinely been ill advised or made a mistake will not necessarily be fined by HMRC.  Read on to learn more…

In an interview with BBC Radio 4, HMRC permanent secretary for tax Dave Hartnett advised that there will be cases where innocent and genuine mistakes have been made by a taxpayer, and where exceptional circumstances will come in to play – and in such situations, where people are innocent of deliberately avoiding tax, there will be no fines demanded.

So, if you have an offshore bank account and have failed to make known to the taxman that you have earnings from that account for example, is it because of a genuine error on your part?  If so, ensure that you come 100% clean to the Treasury and explain the mitigating circumstances surrounding your tax calculation error.

An example of what an innocent mistake amounts to is where incorrect or misleading advice has been given by a financial professional and can be proven.  And an example of a mitigating circumstance is where bereavement or serious illness has resulted in the individual in question failing to make clear on a tax return any offshore income generating assets.  What does not constitute a mistake however is ignorance.  I.e., you cannot claim that you did not know that you had an obligation to pay British tax on any money you had offshore as everyone who is a British domiciled resident tax payer should know that all income and assets are taxable under the British system – no matter where in the world they are held.

So, if you’re innocent of making a non-disclosure through a genuine mistake or an exceptional circumstance, or the tax you owe is less than £1,000 you will not face a fine by the taxman.  Anyone else should take professional advice immediately about getting their affairs in order and correctly disclosed to the taxman by the March 2010 deadline.