Time to declare your offshore bank account

02/05/2007

Do you have an undeclared offshore bank account? If so, now may the best time to declare it to the UK government, because HM Revenue and Customs (HMRC) has announced an offshore tax disclosure amnesty until June 22nd 2007.
 
Anyone who has failed to declare offshore accounts can come clean and benefit from a low penalty rate of just 10% - on top of unpaid tax and interest. This is significantly less than the average penalty charge of 40 to 50% penalty in most cases.

“Last year HMRC was granted unprecedented access to UK bank records identifying customers with offshore funds” explains Jeanette Harwood, Head of Regulatory at Leeds-based law firm Walker Morris. “So if you have ever transferred money between UK and offshore accounts, or used offshore money to pay a UK credit card bill, you can expect your name, address, date of birth and offshore account details to be handed to the Revenue by your bank.”
 
“If you already have declared your account for tax, you have nothing to worry about. However, experience suggests that many people with offshore accounts, including the 280,000 UK householders who own foreign holiday homes, will not have declared them properly, because they do not fully understand the tax position on overseas accounts. The mantra that 'I don't have to pay tax on it until I bring it in the UK' still seems to be widely relied upon. Unfortunately it is not true.”
 
If you live in the UK and you were born here, you must pay tax on the interest earned by offshore funds and declare it on your annual tax return. A similar principal applies to capital deposited overseas – the government will want to see evidence that it was properly declared in the UK. If not, they will be chasing unpaid tax on the capital as well as the interest – almost certainly a significant sum.
 
“Those who don't take advantage of this amnesty could find themselves in direct contact with HMRC over the next few months as they sift through the information provided by the banks,” warns Jeanette Harwood. “These people will face heftier penalty charges and a few cases may even be prosecuted if there is evidence of fraud. If in doubt, take advice sooner rather than later!”