Offshore Client Notifications – Are you Affected?

We have written previously on this blog about various HMRC offshore disclosure facilities designed to encourage taxpayers to come forward and declare any unreported foreign income or gains.

HMRC continue to acquire new powers in order to pursue taxpayers and one of the latest requires advisors themselves to write to certain clients on their behalf.

These rules apply to financial institutions like banks but also to so-called “specified relevant persons” (SRPs). Accountants and tax advisors are likely to be an SRP if they provided offshore advice or services over and above simple preparation and delivery of tax returns in the year to 30 September 2016 regarding a client’s personal tax affairs.

If the advisors fall within the rules and are not covered by certain exemptions they will be required to send a standard HMRC headed document to these clients (although writing to all clients is also permitted) with a covering letter that includes certain wording which may not be altered (these are the Offshore Client Notifications).

One of the key things to note is that HMRC’s document directs clients to submit their own online disclosure. You may suspect they are thus attempting to bypass the advisors. We could not possibly comment! If you need to send such letters, we recommend highlighting to the client the dangers of doing so!

The wording SRPs must include in their covering letter is as follows:

“From 2016, HM Revenue & Customs (HMRC) is getting an unprecedented amount of information about people’s overseas accounts, structures, trusts, and investments from more than 100 jurisdictions worldwide, thanks to agreements to increase global tax transparency. This gives HMRC unprecedented levels of information to check that, as in most cases, the right tax has been paid.

If you have already declared all of your past and present income or gains to HMRC, including from overseas, you do not need to worry. But if you are in any doubt, HMRC recommends that you read the factsheet attached to help you decide now what to do next.”

If you are concerned about how these rules might affect your firm, or are an individual with unreported overseas income, please get in contact with us as we would be happy to assist.

Worldwide Disclosure Facility – Last Chance to Disclose?

HMRC have announced the Worldwide Disclosure Facility (WDF) the latest in a long line of disclosure facilities designed to encourage taxpayers to come forward to disclose previously unreported offshore tax liabilities.

Unlike its predecessors, the WDF does not offer any favourable terms, other than the fact that HMRC state that where the disclosure is correct and complete and the taxpayer fully co-operates by supplying any further information they ask for to check the disclosure, they’ll not seek to impose a ‘higher penalty’, except in specific circumstances (e.g. where the taxpayer was already under enquiry) and they will also agree not to publish details of the disclosure. This last ‘benefit’ may appeal to higher profile individuals who may prefer to remain anonymous in their previous failures.

This is a marked difference to previous disclosure facilities that offered much reduced penalties (such as the 10% rate offered by the Liechtenstein Disclosure Facility) and guarantees against prosecution.

The WDF is targeted as a ‘last chance’ by HMRC before even more strict penalties come into force, as well as their claims that automatic exchange and data from the Organisation for Economic Co-operation and Development Common Reporting Standard (CRS) will then be available.

After 30 September 2018, new sanctions will be introduced that reflect HMRC’s “toughening approach”. They state that you will still be able to make a disclosure after that date “but those new terms will not be as good as those currently available”.

Previous experiences suggest that making a disclosure under one of HMRC’s facilities is usually a more streamlined process compared to simply writing to HMRC.

Eaves and Co would be very happy to discuss matters if you are concerned that you or your clients may have an undisclosed offshore liability, suitable for the Worldwide Disclosure Facility. We have extensive experience of making disclosures under previous facilities that HMRC have offered.

Farce: Manchester United and HM Treasury

Hello,

1)      Sorry for the informality of the greeting but if you were doing a training exercise on fake bombs and security, would you not (at least) count up the number of imitations you had hidden – and then count them back in to avoid scaring/annoying 75,000 people?  See Manchester United and fake security issue?

2)      Secondly, if you were trying to convey ‘good news’ about the ‘initiative to automatically exchange information on beneficial ownership’ (See HM Treasury Press Release), there may be ‘marginal’ concern about the absence of countries [on HM Treasury List dated 13 May 2016] such as China, Russia and the USA (for example)

3)      Thirdly, by definition, dishonest people are going to tell lies, especially if they can get away with it.  Hence, how (for example) is a relatively poor country (say the UK (?)) going to enforce disclosure?

New HMRC Proposals to Target Offshore Tax Evasion

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.

Employer-Financed Retirement Benefit Schemes (EFRBS) Settlement Opportunity

HMRC Offer EFRBS Settlement Opportunity

HMRC are giving employers the chance to settle open enquiries into the use of employer-financed retirement benefit schemes (EFRBS).

The settlement opportunity applies to contributions made by employers on or after 6 April 2006 and before 6 April 2011.

HMRC are of the belief that such arrangements do not work and therefore the settlements will avoid the need to take part in potentially costly litigation, thus benefiting both sides.

Firms will have until 31 December 2013 to enter into an agreement with HMRC.

Two Options Available

They will then be required to choose one of the following two options offered by HMRC:

i) No Corporation Tax deduction can be claimed on contributions to an EFRBS until the relevant benefits are paid out by the scheme, HMRC also expect PAYE and NICs will be due when they are paid out or

ii) A Corporation Tax deduction can be claimed when contributions are made to the EFRBS.  However, when those contributions are made they will be subject to PAYE and National Insurance contributions.

If an employer chooses to settle with HMRC by choosing one of these options they will have until 30 June 2014 to finalise the arrangement.

Interest & Penalties

Under option 1 interest will run from 9 months and 1 day from the end of the accounting period for which the additional amounts are due.

Under option 2 interest will run from 19 April following the end of the tax year in which allocations were made to the date the PAYE Income Tax and NIC is paid to HMRC.

HMRC have said that they will only seek penalties regarding any tax due in exceptional circumstances. However this is caveated by saying that every case will turn on its own facts.

Net Closing In as Guernsey and Jersey Sign Automatic Information Exchange Agreements

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.

HMRC “closing in on undeclared income”

HMRC is continuing with its anti-evasion publicity campaign, “closing in on undeclared income”, through targeted advertisements on over 3,000 billboards in public spaces.

The basic poster is perhaps tacky and to some eyes a little sinister in terms of implicit State Surveillance, but clamping down on evasion has got to show the idea is in the right place.

I was delighted to see that the website had a link saying, “Remember you can get independent advice”.

When you click on this however, you get a list consisting of:-

–          Tax Aid

–          Citizens Advice Bureau

–          GOV.UK setting up

–          Business Finance and Support

The latter entry cross refers to getting public finance for business and GOV.UK.  Bearing in mind the problem highlighted in the (inherently unauthorised) use of public finance through not paying tax, it would seem the latter two sources are inherently unsuitable for independent advice on such tax problems!

Further, assuming the tax problem is large enough to make it worthwhile having an expensive, publically funded publicity campaign, the first two organisations are also inappropriate as they focus on small matters and those who cannot afford professional advice.

As an advisor, I am forced to ask, why is there no mention of real independent tax advice, through qualified professionals?  It seems insulting to qualified professional advisors, who seek to act ethically, that they are not mentioned at all as “independent advisors” but obviously rank behind “family and friends” in terms of expertise, according to the GOV.UK article.

Bearing in mind the recent consultation on so-called ‘High Risk Tax Providers‘, it appears that there is a running theme of mistrust of the profession from HMRC which does not bode well for the future of tax advisory work.

Payroll Schemes and the Isle of Man Disclosure Facility

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.

Liechtenstein Disclosure Facility (LDF): Further Update from HMRC

HMRC have written to tax advisors who have taken part in the Liechtenstein disclosure facility (LDF), informing them on common errors that lead to “unnecessary delays” in the system.

From 1 April 2013, HMRC have said they will be taking a more robust stance on whether LDF certificates are issued in such circumstances.  Incomplete disclosures may be taken as a sign of lack of co-operation, leading to the withdrawal of the beneficial terms under the facility.

According to HMRC, the most frequently omitted items are:

  • A narrative explanation detailing the background to the previously undisclosed items;
  • Computations showing how the taxable figures in the disclosure have been arrived at;
  • A fully completed certificate of full disclosure;
  • The statement of assets and liabilities at the end of the final year covered by the disclosure;
  • Completed letter of offer; and
  • Full payment of the tax, interest and penalties due in the offer.

It is therefore essential to take suitable advice from experienced advisors, in order to ensure the terms of the LDF can be met.  Eaves and Co have successfully completed a number of disclosures under the LDF and would be happy to assist.