In 2007, HM Revenue & Customs announced the introduction of an Offshore Disclosure Facility (ODF) under which taxpayers with undisclosed overseas income and accounts had a limited period within which they could disclose details of this income and these accounts - and be subject to a much lower penalty (10%) than would normally be applied.
For months, we have been promised a further opportunity to make similar disclosures - but the period during which it will apply and the penalties that will be imposed have not been announced, until now.
We still do not know when the new facility will apply but HMRC announced this week that the penalty for disclosures under its New Disclosure Opportunity (NDO) will be set at 10%. This is much lower than most commentators expected and is clearly at a level which HMRC expects will encourage taxpayers to come forward.
It is unlikely that accounts at HSBC, HBOS, LloydsTSB, RBS, NatWest and Barclays will be covered by the NDO. Accountholders with these banks were given the chance to make a disclosure under the ODF and it seems likely that the chance of a 10% penalty has gone for these people.
If the NDO runs along similar lines to the ODF, the reduced penalty will be available to all disclosures - not just those relating to offshore accounts. Taxpayers who have a disclosure to make are likely to face penalties much lower than those which they would otherwise face; under the current penalty regime, taxpayers who have deliberately concealed business takings or income (either through the use of offshore accounts or other methods) can expect a penalty of at least 50% (and perhaps as much as 100%).
If you think the NDO may be relevant to you, or you know someone who may benefit from the lower penalty on offer, our advice would be to contact your tax adviser as soon as possible.
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David Mansell is a Tax Partner at Mercer & Hole.
