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