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Tax penalty chaos: Who said crime doesn't pay?

17th Aug 2009
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Nichola Ross Martin offers a candid view of HMRC’s New Disclosure Opportunity and the Liechtenstein Disclosure Facility.

Back in 2007/08 HMRC offered an Offshore Disclosure Facility allowing taxpayers to declare any previously undisclosed income from offshore sources, which was then subject to tax, interest and a 10% penalty. It all sounded so simple.

Then things got slightly more complicated because, despite its title, people were also allowed to use to the Offshore Disclosure Facility to declare any previously undeclared onshore income too, and were also treated to the same low tax penalty regime. The facility was then dubbed an ‘amnesty’.

This year, HMRC announced a New Disclosure Opportunity (NDO), which is for those who did not cough up the first time around or those who ‘forgot’ to own up (you lucky lot)! Despite all the drama surrounding HMRC’s new powers review and the notion that they’re getting tough with everyone, penalties are still only 10% (although they could also be 20%; it’s not terribly clear when that applies).

This week, another ‘opportunity’ was announced. The Liechtenstein Disclosure Facility (LDF) is an ‘historic agreement’ through which Britons who have invested in Liechtenstein will be offered the chance to declare previously undisclosed income from their deposits in the country’s banks in return for penalties capped at (yes, you’ve guessed it), 10% of the tax evaded over the last ten years. This facility runs from 2009 – 2015. Who said crime doesn’t pay?

In light of this, we all want to know what’s going to happen next. It seems to me that there are a lot of unanswered questions. Can it be that onshore tax evaders are going to be allowed another bite of the cherry at a 10% penalty rate too? Will everyone be on a 10% penalty rate until 2015? What penalty rate will apply to all those MPs who took the tax law into their own hands and got caught out by the Telegraph?

I am truly perplexed as to where this is all leading and what it means to be a ‘common man’. Perhaps I should follow Dave Hartnett on Twitter and ask him…



Replies (3)

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By User deleted
17th Aug 2009 11:55

Tax Penalty Chaos
HMRC does not have anywhere near enough staff to investigate even a small fraction of the cases which are likely to come to light. Therefore, just like the last time, they want the taxpayer to own up and the agent to prepare a full report for them, at the taxpayers' (or fraudulent non-taxpayers') expense. The only incentive for tax evaders to consider is the fear of being caught and getting hit with a much higher penalty.

I agree, this is clear proof that crime does pay. I have no doubt that many account holders will just keep quiet, move their cash and take the chance. Maybe HMRC should raise the stakes and state that they will prosecute anyone who does not take advantage of the offer and seek a gaol sentence and the seizure of all funds held in these accounts under the Poceeds of Cime Act.

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By User deleted
18th Aug 2009 08:22

Where are ODF Prosecutions?
Back in 2007 HMRC stated that if you failed to take advantage of the ODF you run the risk of prosecution. So far there has not been one.

For the NDO to be a success HMRC should have already prosecuted a high profile case and sent someone to jail for not declaring offshore income. I asked a 24 year old relative the other day who Ken Dodd or Lester Piggett was and they didn't have a clue. How many years ago was that?

Also, no one knows about it (except the professionals). I fear the take will be a disappointment for HMRC and the blame lies squarely at their door.

Dave Hartnett states that this is the last such opportunity. What a wasted one!

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By gordon
19th Aug 2009 13:40

Tax amnesty
It's good to see such social equality isn't it?
Under the new general penalty regime, a self employed taxpayer of modest means might easily pick up a 30 to 50% penalty on top of their tax arrears for 6 years of, say, "overclaimed" motor expenses deducted from the profits of their business, when they didn't have the time to keep a detailed mileage log.
Meanwhile, a much richer taxpayer with offshore investments deliberately concealed from the UK tax authorities escapes with 10%.
Let justice be served

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