As you will have likely heard in the press recently, a leak of confidential documents from Panamanian law firm Mossack Fonseca has brought fresh attention to offshore tax evasion through the use of tax havens. It is understood that eleven million documents were leaked from the law firm.
This latest leak together with mutual agreements between governments highlight the ever tightening net for such assets and shows the importance of voluntary disclosure before being “caught” by HMRC.
HMRC have made numerous attempts in the last few years to bring taxpayers back into the system with various offshore disclosure facilities. These have now largely come to an end; however voluntary disclosure should still be pursued as the penalties involved are generally lower than those where HMRC make the first move. This is particularly important with offshore disclosures where the penalties can be up to 200% of the tax due in certain cases.
Eaves and Co have assisted with numerous offshore disclosures and would be happy to help if you have concerns.
HMRC have announced that they intend to introduce a new powers making it easier for them to prosecute failure to declare untaxed offshore assets.
At present, HMRC need to prove that individuals who have undeclared offshore income has intent to evade tax, in order for a criminal conviction to be successful.
Under the proposed new plans, HMRC would only have to show that the income was taxable and undeclared. A consultation will be published but the plans have not progressed this far yet.
These new proposals continue the recent trend to come down hard on offshore tax evasion and mean that anyone with undeclared offshore assets would be at risk of criminal prosecution. Affected individuals may wish to consider using one of the numerous offshore disclosure facilities currently available, before it is too late.
Eaves and Co have assisted with numerous offshore disclosures and would be happy to help if you have concerns.
Guernsey and Jersey signed Automatic Information Exchange Agreements with the UK on the 22 October 2013 – the ‘UK-Guernsey Agreement to Improve International Tax Compliance’ and the ‘UK-Jersey Agreement to Improve International Tax Compliance’. This means transparency between the tax authorities will be higher, and taxpayers trying to hide funds offshore will find that details are sent to HMRC.
The new agreements mean that all the Crown Dependencies have now entered into automatic tax information exchange agreements with the UK, with the Isle of Man having signed on 10 October 2013.
The net is closing in on taxpayers trying to evade tax, but for those wanting to come forward, beneficial disclosure regimes are still in operation in the Isle of Man, Guernsey and Jersey, as well as the on-going Liechtenstein Disclosure Facility.
Eaves and Co have assisted a number of clients with making disclosures of offshore income to HMRC and would be happy to hear from anyone wishing to come forward under these schemes.
Eaves and Co have assisted a number of clients to make disclosures under the Liechtenstein Disclosure Facility (LDF) as well as advice for those affected by the UK-Swiss Tax Treaty. HMRC have made clear that they continue to target offshore funds with more recent disclosure facilities in Jersey, Guernsey and the Isle of Man.
The LDF has been very successful for HMRC and they have even increased the expected yield from £1billion to £3billion.
We have written previously on the differences between the LDF and other disclosure facilities, in particular the more favourable guaranteed immunity from prosecution under the LDF.
A further, and often overlooked, aspect of the LDF which can be much more favourable than the other disclosure facilities is the ability to elect for a composite rate of tax rather than the actual rate. This can mean significant savings where Inheritance Tax is involved. As such, it might be worth those with funds in Jersey, Guernsey or the Isle of Man considering making a disclosure under the LDF where IHT is involved.
We would be delighted to hear from anyone seeking assistance in this area.
Over the years, a number of agency workers and related workers, will have entered into arrangements to try to reduce their tax burdens. In certain cases, these may have involved Payroll Schemes run through the Isle of Man.
HMRC have been cracking down on such schemes for a number of years and have been successful in pulling them apart in a number of cases. With the original scheme providers often no long in existence, the tax is pursued from the end users of the scheme, potentially leading to financial hardship, especially when interest and penalties are also brought into the equation.
In appropriate circumstances, the Isle of Man Disclosure Facility (MDF) could provide an option for users of such schemes to come forward and pay the tax at a reduced penalty rate. The MDF provides a useful framework for making disclosures and would enable the taxpayer to start again with a clean slate. In our experience, this feeling of relief is often the most significant outcome for clients from disclosing.
Eaves and Co have had extensive experience in dealing with the Liechtenstein Disclosure Facility, which operated in a similar manner, and can bring this experience to bear in assisting with a disclosure under the MDF.
For more details on the terms of the MDF, please see our earlier post here. If you think you may be able to benefit from the MDF, please do not hesitate to contact us.
This new tax year sees the opening of new tax disclosure facilities for offshore tax havens of Isle of Man, Jersey and Guernsey. They offer a streamlined disclosure method for offshore hidden funds with a laid down table of reduced penalties for tax errors.
In many ways these new tax treaties are similar to the Liechtenstein Disclosure Facility (LDF) which has been operating for some time now. It therefore makes sense to consider them in the light of experience and lessons learned from the LDF.
The new opportunities to disclose run from 6 April 2013 to 30 September 2016. Whilst 2016 currently sounds a long way off. It is surprising how fast time goes by. Experience with LDF suggests that people are liable to procrastinate, so the sooner they get relevant information, the more likely it is they will take appropriate action before it is too late.
Registering sooner rather than later gives greater protection, because HMRC enquiries continue, and those caught in an investigation are too late to take advantage of the benefits of reduced penalties and time scope of those disclosure schemes.
Whilst Accountants hope that all their clients are honest and do not need specialist disclosure facilities, as a firm dealing in serious tax investigations we see that such hopes are sometimes dashed. It is useful to make all clients aware of the disclosure facilities, because even the most honest ones may have funds or relations who requires help. Specialist advice is essential (we can help). Sometimes the happiest way forward can be just to provide the client with contact details, so that the existing client relationship is unaffected.
HMRC announced three more disclosure facilities in quick succession as they attempt to tighten the net on tax evaders operating closer to the UK. Memoranda of understanding have been signed with the Isle of Man, Jersey and Guernsey in the last few months meaning more and more taxpayers could be under scrutiny.
Whilst co-operation with HMRC from the above jurisdictions is another nail in the coffin for tax evaders operating off the coast of the UK, these disclosure facilities offer a great opportunity for individuals to wipe their slate clean and take preemptive action.
If individuals come forward under one of the disclosures they will be liable to reduced penalties – which can result in sizeable savings when compared to an ad hoc disclosure or HMRC investigation.
However the disclosure facilities do not offer immunity from criminal prosecution, therefore individuals may wish to disclose using the Liechtenstein Disclosure Facility (LDF). The LDF can be used on worldwide assets providing sufficient funds are transferred to a financial intermediary in Liechtenstein. The LDF offers both reduced penalties (as low as 10%) and immunity from criminal prosecution.
This is certainly an area in which to be proactive on as under the terms of the agreements the jurisdictions will provide HMRC with details of suspected evaders in due course.
Therefore disclosing to HMRC before they come ‘knocking’, not only secures reduced penalties but also allows individuals a greater element of control as to the manner and time frame in which they disclose. This offers piece of mind to the individuals involved.
In addition to the above HMRC are also looking to sign similar agreements with British overseas territories. There are 14 such territories including Bermuda, the British Virgin Islands and the Cayman Isles.
HMRC have announced the Property Sales campaign, a further new disclosure opportunity aimed this time at those with undisclosed taxable gains on residential property sales.
The disclosure campaign requires details of income and gains and the tax payable to be settled in full before 6 September 2013. After this date, HMRC will use the information they hold to target those who should have come forward under the campaign and did not do so.
HMRC states that reduced penalties will be levied on those who make a disclosure, but no firm details have yet been released. At present, a penalty calculator on the HMRC website refers to a maximum penalty of 20%.
This campaign marks a further step in HMRC’s drive to get taxpayers to come forward over undisclosed income and gains, following the recent announcement of the Isle of Man Disclosure Facility, the longer running Liechtenstein Disclosure Facility, and the UK-Swiss Tax Treaty amongst others.
A memorandum of understanding between the Isle of Man Government and the UK’s HM Revenue & Customs was signed on 19 February 2013 setting out the terms of a new agreement and disclosure facility between the two countries.
The financial world becomes steadily more transparent. Those with ‘hidden funds’ should beware. The UK Government is using Money Laundering regulations to pursue previously untaxed funds. The latest is with the Isle of Man Disclosure Facility. The agreements signed include an automatic tax information exchange and the setting up of a disclosure facility.
The Isle of Man Disclosure Facility will run from 6 April 2013 to 30 September 2016 in order for taxpayers with relevant investments in the Isle of Man to bring their tax affairs up-to-date.
The terms set out in the Memorandum suggest that the Isle of Man Disclosure Facility will bear some similarities to the Liechtenstein Disclosure Facility, including an April 1999 cut-off date, a guaranteed penalty rate of 10% for returns due to be filed before April 2009 and a proposed single point of contact.
There are some key differences however, including the fact that there will be no guarantee against criminal investigation for tax related offences.
Further confirmation will be needed but it appears that a qualifying connection to the Isle of Man could be established if an interest in relevant property is established at any time before 31 December 2013. This may mean that those with undisclosed income could transfer assets to the Isle of Man in order to take advantage of the beneficial tax treatment available.
Eaves and Co have successfully completed a number of disclosures under the Liechtenstein Disclosure Facility and will therefore be well placed to advise on the new Isle of Man Disclosure Facility if you are affected.
A copy of the Memorandum of Understanding can be found here, whilst the HM Treasury press notice can be viewed here.