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10% Penalty for voluntary disclosure

03 June, 2009

A 10% penalty for UK taxpayers who voluntarily disclose unpaid tax on accounts held offshore has been confirmed by the HMRC. However, the 10% penalty on the outstanding tax owed, plus interest, for this 2nd amnesty, will only apply to taxpayers who were not covered by the first amnesty in 2007.

A spokesman for the HMRC has said that this will be the last chance for people with offshore assets to get things sorted out in an advantageous way. He re-iterated that this did not apply to anyone who had previously had an opportunity to come forward, as they will be subject to a higher penalty, but he was unable to confirm what the penalty would be. He did however confirm that for all first-time disclosures, the penalty is strictly 10%, irrespective of the amount of undeclared funds. ‘It’s the behaviour we’re interested in, not the amount of money,’ he said.

It is therefore advisable for anyone who has undisclosed tax liabilities connected to offshore bank accounts to seriously consider using the Offshore Disclosure Facility (“ODF”) as this is the final opportunity for taxpayers to come forward and make a disclosure under this ‘lighter’ touch approach. If the HMRC decides to investigate anyone at a later stage they are likely to come under a great attack and in some cases may even face prosecution.

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