|
What are some of the practical difficulties of the tax amnesty (or Offshore Disclosure Facility)?
The practical difficulties that may be faced when taking part in the tax amnesty (offshore disclosure) are numerous.
Timing
The first hurdles are the deadlines for registering under the tax amnesty (22 June 2007) and with meeting the deadline for the offshore disclosure forms (26 November 2007). What happens if these deadlines are not met is unclear from any of the published information on the partial tax amnesty. It is not unreasonable to guess that if the registration date for the tax amnesty is not met then the individual (or company) will not be able to participate and that any disclosure will be treated under the normal disclosure process. With regards to the deadline for making the offshore disclosure return it is anticipated that failure to meet this deadline will result in the withdrawal of the 10% penalty and the imposition of tax geared penalties in excess of the 10% offered under the tax amnesty.
Information Gathering
Although HMRC view that many people will have the relevant information or will have enough information to make reasonable estimates it is our opinion that in a significant number of cases the information will not be available. The individual can apply to the bank for duplicate statements. This can incur costs of approximately £5 per statement. The statements can be obtained using the data protection act for in many instances a one off fee of up to £15. However, given the number of people making a claim against banks for excessive charges many of the banks are struggling to provide statements quickly and can often take up to 3 months to provide these. Given that this workload will increase significantly due to the number of requests made as a result of the tax amnesty this may mean that delays are experienced in excess of 3 months. Thus this leads to little time to analyse these. Experience dictates that once the statements are obtained there will then be further information needed as to expect an individual to remember details of every transaction is somewhat unrealistic. Thus the 5 month deadline for making the offshore declaration will become tight if the information is not readily available
Prosecution
Unlike the Civil Investigation of Fraud procedures there is no guarantee that even if a full disclosure is made that the individual will not face prosecution. Thus if the individual falls within the Boards Prosecution policy they may be providing evidence for the Crown. Also if estimates are made to meet the deadline and these turn out to be materially incorrect then the individual will face potential prosecution. Careful handling is therefore required to ensure that the individuals risk of prosecution remains low.
Calculation of the Tax
There are a number of taxes and duties covered by the tax amnesty offshore disclosure. These include:
- Income Tax
- Corporation Tax
- PAYE
NIC
- Capital Gains Tax
- Inheritance Tax
- VAT
- Excise Duties
S419
- Tax on overdrawn directors’ loan accounts.
- Benefit in Kind Taxation and National Insurance calculation.
Many of these taxes interact and most individuals will find it difficult to calculate all of the taxes due. Many professionals use specially designed software to calculate tax. Given the number of different rates and allowances over the past years this is a difficult task if the individual does not have access to the appropriate information and experience and will lead to many mistakes if care is not taken. Many tax professionals train for years to be able to do the calculations necessary and to expect the general public to be able to do this as part of a tax amnesty is somewhat naïve thinking.
Estimates
If estimates are made when completing the offshore disclosure statements then HMRC have stated in their published documentation that they “may ask you to justify any estimate”. They also state that it should be possible for you to “make reasonable estimates”. Unfortunately just pulling figures out of thin air will not meet the requirements of HMRC. HMRC’s definition of best estimates usually involves either scaling back the known information using the retailed price index or having a wealth of supporting evidence to back up the figures. Thus many individuals could have difficulties if there is no recognised HMRC methodology or documentation to support any estimates. Again a material discrepancy will as a minimum mean increased penalties and could result in a potential prosecution. To be able to provide estimates that stand a robust chance of being accepted as reasonable by HMRC requires a considerable degree of experience.
It should also be remembered that there may be additional costs that can be claimed (such as suppressed purchases or costs relating to property purchased with untaxed income) and these also need to be considered as part as the tax amnesty disclosure.
If you would like to discuss any possible disclosure to HMRC or any matter to do with the potential tax amnesty or how to deal with any tax evasion difficulties please phone 0800 734 3333 or e-mail scott.gilbert@gilberttax.co.uk now
For more information about the different types of tax investigation
cases we deal with on a regular basis please click
here.
To find out what some of our clients have said about us please click
here.
|
