HMRC’s Tax Amnesty for Offshore Bank Account Holders

Last year when Barclays Bank lost their appeal against the ruling to allow HM Revenue and Customs access to their UK based offshore bank account holders’ information, many who held accounts with the likes of Barclays in the Channel Islands and the Isle of Man began to panic about what that might mean for the protection of their personal privacy rights and their taxation status.

However, as HM Revenue and Customs clearly state on their website - “there is nothing wrong with holding an offshore account as long as you pay any tax due on the money deposited in it, and on the interest from it” – but for all those who have failed to disclose their entire tax liability or who are unsure whether they have a liability outstanding, here are all the facts you need to know about HMRC’s tax amnesty for offshore bank account holders which is a limited period of time HMRC has given those with liabilities to disclose them and make good, financially speaking.

If you hold or have held an offshore bank account at any time in the past 20 years and this account is in some way connected to a ‘loss’ of UK taxation then you need to know more about HMRC’s tax amnesty for offshore bank account holders. 

By ‘offshore’ we mean any location other than England, Scotland, Wales or Northern Ireland - so this includes the Channel Islands, the Republic of Ireland and the Isle of Man for example; and by ‘loss of UK taxation’ we mean non payment of required duty.

Following the ruling against Barclays Bank, a number of other key banking institutions such as HSBC who hold their primary offices onshore in the UK but who handle offshore accounts for UK nationals in locations such as the Channel Islands have all been forced to disclose complete details of all those customers with addresses in the UK who have accounts offshore.

HM Revenue and Customs are certain that a number of these customers have failed in the past to pay the taxation due on interest from their offshore banking activities for example, and now they want to recoup their losses.  To do this however requires significant time and resources, and so to expedite the situation HMRC have offered a so called ‘tax amnesty’ to those who have debts to pay.

Anyone who believes they may have a liability has until the 22nd of June 2007 to notify HMRC of their intention to make a disclosure.  This can be done in one of the following ways, by calling 0845 302 1401 (or + 44 1506 476 094), by writing to HM Revenue & Customs, Section 10, Accounts Office, Bradford, BD98 1YY, England or by going online to the Revenue and Customs website.

Those who declare their intention to disclose then have from June the 28th to the 26th of November 2007 to submit their disclosure together with their complete back payment of all taxes, duties, interest and penalties due – again, a disclosure can be sent to the above postal address with payment in cheque form or you can pay via a direct transfer with all details available on the HMRC website.

So – who’s liable, who’s affected and what do you need to do next if you’re unsure about your liabilities or your situation?

Well, if you are resident for tax purposes in the UK but you are of foreign domicile, you are probably only liable for taxation on the money you bring in to the UK.  So if you have offshore accounts or accounts in your own home country but you do not use that money in the UK, chances are you are exempt from UK taxation – but if in doubt you need to check with an accountant.

If you are tax resident and domiciled in the UK then I am afraid you have no right to avoid taxation on the interest earned on deposits in offshore bank accounts, and if you have failed to pay tax due you are going to have to make a disclosure or risk HMRC sending you a letter a few months down the line asking for back payment of taxes as per their calculations of what you owe - together with a hefty fine.

If you are in any doubt whatsoever or you need advice about, or assistance with, a disclosure then get an accountant on board immediately who can sit down and help you work it all out.  It is not worth risking the submission of a half hearted disclosure and it is not worth ignoring this issue and hoping it will go away.

Now, don’t lose heart and get depressed – there is some good news in all of this.  For a start, if you make complete disclosure you only have to pay a fixed penalty on top of the tax owing of 10% of the tax that you have underpaid in the majority of cases.  If you don’t make a disclosure and HMRC come calling further down the line, then you are likely to have to pay a fixed penalty of 100% of the tax avoided as well as the tax avoided - so you can save yourself 90% of your potential penalty with HMRC’s tax amnesty for offshore bank account holders.

The other good bit of news is that there is no penalty on disclosures totalling less than GBP 2,500. 

If you find that you are not in a position to financially pay everything you owe, get your disclosure together as soon as possible and contact HMRC personally.  Depending on the circumstances and your personal situation they will do what they can to work with you to come up with a repayment solution.

Try and remember that while HMRC as a concept is a scary and powerful entity, the people who will be dealing with you and your disclosure are humans and they are doing a particular job - if you work with them, they will try and make everything as smooth as possible for you.

And finally, there is complete information as well as an extensive and comprehensive FAQ available online at HMRC’s website.  This information should cover all outstanding questions but if you are left in any doubt about any point of this whole tax amnesty and offshore bank account crackdown, seek competent financial advice from an accountant immediately.