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Time running out for offshore disclosures

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People with undisclosed funds held in offshore accounts are being reminded that they have only a few days left in which to take advantage of a reduced penalty rate on the taxes owing.

Under the New Disclosure Opportunity (NDO), people who contact HM Revenue and Customs (HMRC) voluntarily will only face a penalty charge on undeclared, unpaid taxes of 10 per cent of what is owed.

But they must notify HMRC by 4 January 2010 to benefit from the 10 per cent rate.

In principle, HMRC is entitled to impose a fine of 100 per cent but is hoping that, as in the last ‘amnesty’ in 2007, the reduced penalty will encourage more account holders to come forward.

Higher rate taxpayers with offshore savings accounts need to pay 40 per cent tax on the interest that is generated, irrespective of whether the money is re-introduced to the UK. Basic-rate taxpayers must pay 20 per cent.

HMRC is also tracking tax owed on other assets such as holiday homes which have produced income from lettings.

Notification of undisclosed offshore funds and assets can be made online and does not require any tax calculation or payment. HMRC said that it simply needs a few details for the taxpayer to be included in the NDO.

However, once the scheme is closed, those found to have undisclosed assets will be subject to a full tax investigation and could face penalties of up to 100 per cent.

HMRC has issued statutory notices to over 300 banks in the UK requiring them to provide information about customers with offshore accounts.

Stephen Timms, the Financial Secretary to the Treasury, said: “The use of offshore accounts to evade UK tax is illegal. It deprives the UK of tax revenues to fund essential public services and is unfair to the vast majority of honest taxpayers who pay what they should.

“I urge anyone in this position to come forward and sign up. Time is running out but it’s still not too late.”

Dave Hartnett, HMRC’s permanent secretary for tax, added: “From 5 January HMRC will begin to investigate those who were eligible to use the NDO but failed to do so. Penalties could then be increased to 100 percent of the tax evaded – wiping out any advantage from going offshore in the first place. Notification of intention to use the NDO could reduce this by 90 per cent.

“I strongly urge anyone who thinks they have something to tell us to come forward now as HMRC will follow up all undeclared off shore accounts where there is significant tax to pay.”