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.
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.
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.
As part of the agreement between the UK and Swiss governments which recently came into force, the UK-Swiss Tax Treaty, in an attempt to reduce evasion in Swiss bank accounts the Swiss have paid over the equivalent of £342m to the UK.
The payment is the first instalment of the levy on bank accounts held in Switzerland by UK taxpayers, designed to cover arrears on previously unreported income. The levy will apply to accounts in Switzerland unless the account holder allows the bank to disclose details to HMRC.
Current and future tax liabilities will be covered under the UK-Swiss Tax treaty and it is anticipated it will raise around £5bn in the next five years. Prior years will be covered by the levy whilst future years will be covered by witholding taxes within the accounts in Switzerland. In many cases, depending on the level of growth seen in the accounts, the levy under the treay can work out more expensive than other disclosure options, such as the Liechtenstein Disclosure Facility (LDF).
If you are interested in more details on the UK-Swiss Tax Treaty or the Liechtenstein Disclosure Facility, please contact us or take a look at our UK-Swiss Tax Treaty page.
Following the UK-Swiss Tax Treaty which was signed in October 2011, Swiss banks are now sending letters to all account holders that have a connection to the UK and may therefore be liable to tax charges under the UK-Swiss Tax Treaty.
Some banks have already posted the letters, whilst others will send them out during the next month or so. Eaves & Co have already been contacted by concerned taxpayers in receipt of letters from their Swiss bank.
If you/your client receive letters regarding the UK-Swiss Tax Treaty then you should ensure that swift action is taken if you wish to avoid the one off levy in May 2013 and on-going withholding taxes.
Where there are undisclosed tax liabilities in issue then it will be necessary to consider whether to continue under the withholding system set out in the UK-Swiss Tax Treaty and retain anonymity or make a disclosure to HMRC – perhaps by taking advantage of the Liechtenstein Disclosure Facility (LDF).
It is important that clients with no undisclosed liabilities do not simply ignore the letters because the terms of the UK-Swiss Tax Treaty mean that the Swiss bank will need to receive confirmation from a UK tax professional certifying that the income has been disclosed to HMRC (or that the taxpayer is non UK domiciled and claims the remittance basis so disclosure is not required) before they can dis-apply the one off levy and annual withholding tax.
As the timeframe moves closer for the UK Swiss Treaty to come into operation (1 January 2013) there have been some further changes to its terms.
On 18 April 2012 the UK and Switzerland exchanged letters with the outcome being that the minimum rate payable on capital through the treaty has been raised to 21%. The upper rate also being raised and to 41%.
Switzerland (Photo credit: siette)
Clearly this makes the UK Swiss Treaty even less palatable, with some commentators saying that only people wishing to remain anonymous should suffer the levy. However, an initial professional consultation for anybody considering the matter remains a necessity in considering the alternative routes to redress of their tax position.
HM Revenue and Customs recently announced that a plumber who failed to disclose income tax of £91,000 has been jailed for tax fraud for 12 months.
This case highlights that HM Revenue and Customs are cracking down on tax evasion; clients and their advisers should carefully consider making voluntary disclosures now.
There are a number of disclosure schemes available which may offer benefits such as; reduced penalties, the ability to limit the number of years that HM Revenue and Customs may go back to assess tax, payment of tax by instalments and protection against criminal prosecution.
Current disclosure facilities include:
The Liechtenstein Disclosure Facility (LDF) – where taxpayers do not currently have assets in Liechtenstein it may be possible to transfer assets now so as to qualify for the terms of the LDF
E-Markets Disclosure Facility – this facility is aimed at people who sell goods or services on online websites (such as eBay or Amazon) and whose activities are treated as a trade for tax purposes
Electrician’s Tax Safe Plan (ETSP) – please note that the deadline to notify intention to disclose under this facility is 15 May 2012
The UK-Swiss Tax Treaty – whilst not strictly a disclosure facility the impact of the UK-Switzerland Tax Treaty should be considered carefully by those with undisclosed Swiss income.
At Eaves & Co we have experience of preparing voluntary disclosures and have successfully submitted disclosures under the LDF for a number of clients. For further advice regarding the disclosure of unpaid tax please contact Eaves & Co Specialist Tax Advisors’ Leeds office on 0113 244 3502.
HM Revenue and Customs have launched a new amnesty for taxpayers suspected of committing serious tax fraud.
Under the Contractual Disclosure Facility (CDF), HM Revenue and Customs will write to taxpayers that are suspected of committing tax fraud to offer the opportunity to make a disclosure of unpaid tax liabilities within 60 days. In return HM Revenue and Customs will agree not to pursue criminal prosecution against the taxpayer.
Taxpayers that have not yet been contacted by HM Revenue and Customs may voluntarily request to be considered for the CDF. Alternatively those with offshore assets could consider registering under the Liechtenstein Disclosure facility (LDF).
For more information and advice regarding the disclosure of tax to HM Revenue and Customs please contact Paul Davison at Eaves & Co on 0113 2443502.
The maximum penalty for failure to disclose income or capital gains has traditionally been 100% of the underpaid tax.
HMRC have recently published a list of more than 50 jurisdictions. Taxpayers will face penalties of up to 200% of their tax liabilities for non-disclosure of income or gains of assets invested in these countries.
The level of penalty is based on the perceived transparency of the jurisdiction and their willingness to share information. HMRC have categorised The Isle of Man and Guernsey as more transparent than Jersey or Gibraltar, for example.
This change in the maximum rate of penalties makes the ongoing Liechtenstein Disclosure Facility (LDF) even more attractive given that it attracts a fixed penalty rate of 10% – which could make a significant difference compared to a 200% penalty.
Please see our latest newsletter for further details on the LDF by clicking the link or by visiting our website directly.
If you would like further advice on any of the topics discussed, please contact us by: