This month I had the opportunity to sit down with Amanda Taylor from Marine Accounts for a Q&A session on the Offshore Disclosures Facility.
Firstly could you explain to me what the Offshore Disclosures Facility is?
The Offshore Disclosures facility is an amnesty for UK citizens that have undeclared offshore earnings. It is directly aimed at targeting offshore evasion. The G20 have now also opted for similar schemes such as the Offshore Disclosures Program in the United States & Project Lets Do It in Australia.
What is offshore evasion?
Offshore evasion is using another jurisdictions systems with the objective of evading UK tax. Broadly speaking this falls into three areas:
- Moving UK gains, income or assets offshore to conceal from HMRC
- Not declaring taxable income or gains that arise from overseas
- Using complex offshore structures to hide beneficial ownership of assets, income or gains.
When does the amnesty end & what happens if I do not declare?
Time is definitely running out for those who have not already declared. The UK disclosure facility ends on 30th September 2016. Individuals who choose not to declare their earnings can face fines of up to 200% of tax evaded and possible imprisonment as it is now a criminal offence.
Project Lets Do It in Australia came to an end on 19th December 2014. The IRS however have not stated when their Offshore Disclosures Program will end.
How can I declare my earnings through the facility and what are the benefits?
You can make an application to register for the disclosure facility, however it is recommended that advice is sought from an expert before proceeding to ensure that any disclosure you are making will be complete and accurate.
Tax legislation can be very complex and therefore you should ensure that all details being submitted are correct and that no aspect has been left out.
What happens if HMRC contact me first?
If they make contact with you first you are faced with the following prospects:
- Tax investigation into your financial affairs
- You will not qualify for penalties at the lowest rates
- You will have to pay the taxes you owe for up to 20 years
- You could face criminal prosecution
What if I move my funds to the Cayman Islands, surely it is safe there?
The UK signed ten more automatic exchange agreements in 2014 with the following Overseas Territories; Anguilla, Bermuda, the BVIs, the Cayman Islands, Gibraltar, Monserrat and the Turks & Caicos Islands; and the Crown Dependencies: Jersey, Guernsey and the Isle of Man.
The new global standard developed by the OECD has been endorsed by the G20 and now 44 jurisdictions in total. This will lead to a step change in tax transparency and the ability for governments to clamp down on those who seek to evade paying tax.
What exactly will the new global exchange mean? What type of information will the G20 actually have access to?
In HMRCs No Safe Havens annual publication on the facility they outline exactly what information will be shared. The 44 jurisdictions are shortly going to share the following:
If you have:
- A bank account
- An investment account
- A custodial account
They will also be able to see:
- Your name
- Full address
- Account number
- Annual balance
- Details of your income
When I browse the yachting forums on Facebook I still see individuals posting ‘where is the best place to open an account to avoid paying tax?’ What is your view point on this with regards to the facility?
HMRC contacted over 20,000 people in 2013 about their offshore assets. In 2014 under new legislation offshore banks in any of the 44 jurisdictions were required to start collecting information on offshore accounts of UK & US residents. This information will reach HMRC by the start of 2016.
Clients who bank offshore could also face their accounts being frozen if they cannot prove that they have disclosed their offshore income.
Are offshore accounts still permitted under the Offshore Disclosures Facility?
Yes. There is no problem with anyone holding accounts overseas, provided they have met their obligations to declare all income that is taxable in the UK to HMRC. There can be many reasons why people choose to have offshore accounts, not all of these are for the avoidance of tax.
If you have any concerns surrounding your offshore accounts please feel free to contact a member of the team today.