At the end of this year an amnesty for UK tax resident persons whose offshore income and gains have not been disclosed to HMRC closes, and it is important the implications are understood according to Michael Crowe, a director at Grant Thornton in the Isle of Man.

In the UK’s March 2015 budget, Chancellor George Osborne announced an earlier than expected closure of Crown Dependency and
Liechtenstein disclosure facilities, as well as an array of new civil and criminal penalties.

These facilities offer advantageous financial settlement terms for people who are UK resident for tax purposes whose offshore income and gains have not been declared to Her Majesty’s Revenue and Customs. Undeclared liabilities need only be disclosed for periods after 6 April 1999, with the added benefit of reduced penalties (starting at 10%). The Liechtenstein facility also offers immunity from prosecution where full disclosure is made.

However, all of the current disclosure facilities will close on 31 December 2015.

After that, HMRC will offer one ‘last chance’ disclosure opportunity. Open for a limited period from January 2016 to mid-2017, the facility anticipates the sharing of information under the Common Reporting Standard (CRS) and offers less favourable terms with penalties starting at a minimum of 30% and no guarantee of immunity from prosecution.

Mr Crowe said: ‘As the tax amnesties are being withdrawn, measures are already in place to seek out those who refuse to come forward voluntarily.

‘HMRC will gain unprecedented access to previously inaccessible financial information under the CRS. Close to 100 jurisdictions worldwide, including the Isle of Man, will as a matter of routine provide to HMRC information obtained automatically from all financial institutions, not just banks. HMRC will receive names and addresses of all UK resident account holders, account balances and income received (e.g. interest, dividends and gains).

‘Information exchange is happening now; interest income data has already been gathered and shared with HMRC under the
European Savings Directive. For assets held in the Crown Dependencies and other offshore territories, information will be shared with HMRC as of 2016.

‘Identifying UK taxpayers will be more straightforward than ever before and, having done so, HMRC will have to decide whether to prosecute or impose a significant financial penalty for undeclared liabilities.’

Draft legislation in the UK aims to make it possible for HMRC to prosecute individuals who have undeclared offshore tax liabilities of ?5,000 without needing to prove any intention to commit tax evasion. A custodial prison sentence could await those falling foul of the new legislation. In addition, a new ‘aggravated penalty’ of 50% will apply to those intentionally moving the proceeds of undeclared income and gains to escape detection under the CRS.

Mr Crowe added: ‘Of course, for those who already declare their overseas income and gains on their tax returns, there is no cause for concern. For those who do not, time is running out to put matters right under the most favourable terms.

‘Any UK taxpayers with undisclosed overseas investments who do not come forward voluntarily should understand that the likelihood of being found out is higher than ever before. If they are, HMRC investigations could deplete their investments significantly by the taxes, interest charges and greater penalties imposed and there is the very real risk of a prison sentence.’

Photo - Michael Crowe.