Guildford: PKF advises disclosure to HMRC now
HM Revenue & Customs (HMRC) will launch a New Disclosure Opportunity (NDO) in September, but Jon Hills, tax partner in the Guildford office of PKF Accountants & business advisers, says it could be cheaper to voluntarily come forward now.
To use the last amnesty in 2007, the Offshore Disclosure Facility (ODF), taxpayers had to come clean about un-declared tax over the past 20 years. For those coming forward voluntarily, the period they will be asked to declare, could be much less, perhaps with only the past six years being amended.
Hills explained: “By voluntarily coming forward now there is a reasonable prospect of agreeing to settle with HMRC for the tax and interest on the ‘in date’ years only (currently 2003/4 to 2007/8). In contrast, the last amnesty covered 20 years and it is thought likely that the new disclosure opportunity will too. So, before even looking at the numbers, it is clear that you could end up paying much more if you wait until the NDO starts before making a disclosure.
“It is true that the penalty rate charged is likely to be higher than the 10% rate available under the amnesty: even so, a penalty of 20% should still be achievable if you come forward now. However, because the difference in the number of years involved is so stark, it is a reasonable bet that people will save money overall if they come forward now rather than waiting until the autumn, when the NDO starts.”
For example, consider the position where an individual had £1m of clean funds deposited overseas at the start of the tax year 1989/90 and it earned interest at a steady 5%. The tax and interest charges for the ‘in date’ tax years would be £251,849. If they wait for the NDO, they would owe HMRC £954,846, a massive difference of £702,997.
Hills added: “The main reason for the difference is the interest on the overdue tax - it adds up very quickly indeed and for the first five years, 1989/90 to 1993/94, it is more than 100% of the actual tax.
“Obviously there are other variables to consider for each individual. But if you want to come clean on your taxes, taking expert advice before the NDO goes live will help you choose the most cost-effective method.”
