The New Disclosure Opportunity (NDO): new tax 'amnesty'
FAQs NDO: new tax 'amnesty' – What is it?
In the 2009 budget the Chancellor announced a new ‘tax amnesty’, to be called the ‘New Disclosure Opportunity’ (NDO), for UK residents who have unpaid tax connected to an offshore bank account.
NDO: new tax 'amnesty' – What are the benefits of making a disclosure?
Most disclosures made under the ‘tax amnesty’ benefit from a fixed penalty of 10%, far lower than can be expected in normal circumstances. Another significant advantage is that the process for making a disclosure under the NDO is far less intrusive and costly to deal than the sort of full investigations HMRC are likely to launch into people who fail to disclose voluntarily. You will still need to pay the correct tax due and any interest due on the late payment of tax.
NDO: new tax 'amnesty' – When does the disclosure need to be made by?
There is a two stage process for making disclosures under the ‘tax amnesty’. Before making a disclosure you must first register with HMRC to obtain a disclosure reference number (DRN). This must be done between 1 September 2009 and 30 November 2009. Once the DRN has been obtained, disclosures can be made from 1 September 2009 until 31 January 2010 for paper disclosures and between 1 October 2010 and 12 March 2010 for online disclosures.
NDO: new tax 'amnesty' – What happens if I don’t have an offshore bank account but I have unpaid tax which I have not disclosed, can I make use of this ‘tax amnesty’?
No, HMRC have confirmed that disclosures not related to an offshore bank account cannot be made on the same terms as the NDO. However, in many cases where a person makes an unprompted full disclosure, it is possible to limit any penalties due to 10% of the tax. HMRC have stated that the NDO guidance that will be published soon will provide a central address to make such disclosures.
NDO: new tax 'amnesty' – Who is affected?
Potentially, everyone who has a UK address and has held an offshore bank account. Even if the account has been closed in recent years, the experience of the 2007 ‘tax amnesty’ shows that HMRC can obtain details of these accounts.
NDO: new tax 'amnesty' – I have an offshore bank account but I have received advice that I do not need to declare the interest I receive to HMRC, is this correct?
There are some people (for example certain non-UK domiciled individuals) who will not need to declare interest earned on an offshore account. However, this is a complex area of law and even if you believe that you are not-UK domiciled, you should ensure that you have received advice from a suitably tax qualified advisor that none of the income arising on your offshore accounts is taxable in the UK, particularly if your circumstances have changed.
NDO: new tax 'amnesty' – How do I make a disclosure?
You will be able to register to make a disclosure by phone or by post from 1 September 2009 and online from 1 October 2009. You must register by 30 November 2010 to be able to take advantage of this ‘amnesty’. The disclosure itself can be made online or by post. The full details of how to do this have not yet been released by HMRC. This site will be updated when the details are announced.
NDO: new tax 'amnesty' – What happens if I don’t make a disclosure?
The likelihood is that you will be subject to an intensive investigation by HMRC not only into the detail of your offshore bank account but also into other aspects of your tax affairs such as your business. You will certainly need to evidence the source of the capital paid into the offshore bank account if you are subject to an investigation. As a minimum HMRC have stated that a 30% penalty will be levied rather than the 10% penalty offered by the ‘tax amnesty’. In some cases the penalty may be more than 30% or you could even face a criminal prosecution.
NDO: new tax 'amnesty' – Do I need a professional advisor?
Although the forms for making a disclosure under the NDO appear straightforward, in many cases a high level of judgement and expertise is needed to arrive at the figures to be included on the forms. It is therefore highly recommended that you engage a qualified tax advisor with experience of dealing with HMRC investigations and the previous ‘tax amnesty’. It should be remembered that you must make a full disclosure of tax unpaid as a result of any other tax irregularities as well as any tax unpaid in connection with an offshore bank account. If you make an incorrect disclosure you may be subject to a criminal prosecution or, as a minimum, higher penalties.
NDO: new tax 'amnesty' – If I make a disclosure under the New Disclosure Opportunity will I be immune from prosecution?
Immunity from prosecution is not guaranteed by HMRC, but so long as you make a full disclosure of the tax unpaid then the possibility of prosecution is remote. If, for any reason, you think you may be at particular risk of prosecution, a tax investigation specialist will be able to advise you whether your circumstances are such that HMRC may consider prosecution, and how that risk can be minimised.
NDO: new tax 'amnesty' – Can I just wait for the next ‘amnesty’ and make a disclosure then?
No, this is the last chance to make a disclosure of unpaid tax in connection with an offshore bank account. HMRC have made clear that no further opportunities of this sort will be offered. If you do not register with HMRC by 30 November 2009 HMRC have confirmed penalties will be a minimum of 30%. In some cases the penalty may be more than 30% or you could even face a criminal prosecution.
NDO: new tax 'amnesty' – What happens if I received a letter from my bank and/or HMRC confirming that my bank details had been disclosed to HMRC as a result of the last ‘tax amnesty’ in 2007 but I didn’t make a disclosure at that time? Can I still make a disclosure under the new ‘tax amnesty’ (New Disclosure Opportunity)?
Yes, you can make use of the new ‘tax amnesty’ however, in these circumstances HMRC will charge a 20% penalty instead of 10% available for most disclosures.
NDO: new tax 'amnesty' – Does the fact that HMRC have started a new ‘tax amnesty’ mean that they have closed their investigation into holders of accounts with the banks (the five main high street banks) covered by the first ‘tax amnesty’?
No, HMRC are still scrutinising the details of the bank accounts received as part of the first ‘tax amnesty’ and it is still possible that prosecutions could result from this. Follow up investigations into accounts where no disclosure was made are still ongoing.
