Taxpayers who want to take advantage of reduced penalties by declaring secret offshore income and assets to HM Revenue & Customs (HMRC) have until the end of the year to bring their finances up to date.
All the current offshore disclosure schemes will close on December 31, according to an announcement from HMRC.
Although a new disclosure opportunity with less attractive settlement penalties will start next year, HMRC will also gain new powers to identify and prosecute offenders for illegal tax avoidance.
So far, nearly 7,200 taxpayers have signed up for four separate offshore disclosure schemes and handed over more than £1.15 billion in unpaid taxes.
But that’s less than half the £3 billion the government expected to raise when the schemes were announced in 2012.
Where the money was hidden
HMRC breaks down the tax raised as:
- Liechtenstein Disclosure Facility – 6,650 taxpayer registrations and £1.15 billion tax raised, with 16 paying more than £5 million, 154 paying between £1 million and £5 million and just under 4,000 of the registrations were for undeclared tax of less than £100,000.
The average settlement was £174,000.
- Jersey Disclosure Facility – 232 registrations raising £2.2 million
- Guernsey Disclosure Facility – 56 registrations raising £700,000
- Isle of Man Disclosure Facility – 232 registrations raising £3.7 million
Tax experts warn HMRC will receive huge tracts of data about UK taxpayers with cash and investments overseas from the US Internal Revenue Service (IRS) under the Foreign Account Tax Compliance Act (FATCA) agreement and the Common Reporting Standard from 2016 onwards.
Common Reporting Standard
The Common Reporting Standard allows tax authorities in almost 100 countries to automatically send financial information about taxpayers from other countries with financial assets in their jurisdiction to HMRC.
The network includes all European Union countries and Switzerland as well as another 70 countries worldwide.
“Once this tax information exchange starts, taxpayers can expect any disclosure offer with discounted penalties to disappear,” said a spokesman for accounting firm Baker Tilly.
“HMRC is unlikely to look so leniently on tax avoidance and taxpayers can expect stricter penalties and confiscation of their overseas assets.”