The Offshore Disclosure Facility
What are the terms of this facility?
- You must have notified HMRC of your intention to make a disclosure by 22 June 2007.
- A fixed penalty of 10 per cent of the tax/duties you have underpaid.
- No penalty on disclosures of untaxed amounts totalling less than £2,500.
- Certainty of treatment throughout - You will know the rules and timetables in advance.
- Disclose with full payment of tax, duties, interest and penalties by 26 November 2007.
- A final decision from HMRC on whether or not your disclosure has been accepted as soon as possible and by 30 April 2008.
Who can use this facility?
This facility is open to those who hold or have held, either directly or indirectly, an offshore account that is in any way connected to a loss of UK tax and/or duties. Offshore means anywhere outside the United Kingdom of Great Britain and Northern Ireland. Therefore offshore accounts include any held in the Channel Islands, the Isle of Man and the Republic of Ireland.
What are the key dates?
| Stage 1 22 June 2007 |
Stage 2 26 November 2007 |
| You must have notified HMRC of your intention to make a disclosure by 22 June 2007. If you have done so you can use this facility If you have missed this deadline you can still disclose to any HMRC office but you will not be within the terms of this facility. |
Make your disclosure and pay all taxes, duties, interest and penalties by 26 November 2007 You can disclose online or by post. Disclose:
|
Are migrants and foreign students affected by this facility?
This facility is unlikely to be relevant to migrants to the UK and foreign students who have bank interest arising on accounts held in their home country. This is because they are likely to have a 'foreign domicile', which means they are not liable to UK tax on interest arising on those accounts unless the money is brought or transferred to the UK.
What disclosures are unlikely to be settled through this facility?
We anticipate that the vast majority of disclosures will be accepted. However, certain disclosures are unlikely to be settled through this facility.
- Disclosures that are found to be materially incorrect or incomplete when checked by us for accuracy and completeness.
- Disclosures from customers where we have begun an investigation or enquiry into their affairs. Those who want to disclose liabilities should tell the person conducting the enquiry. A full and early disclosure will influence the amount of penalty we seek.
- Disclosures from people suspected of being involved in serious organized crime against us (including VAT MTIC – carousel – fraud, VAT Bogus Registration Repayment fraud or organised Tax Credit fraud), and those involved in wider criminality or others whose circumstances would result in a criminal investigation in accordance with our published Criminal Investigation Policy.
You cannot use this facility if you have not held an offshore account that has been connected with a loss of UK tax. However, as in the past, you can make a disclosure to any HMRC office. If you approach an HMRC office and then make a full disclosure with payment under the same terms as within this facility, you can expect the same treatment. We may need to see appropriate evidence to satisfy us that the disclosure is complete.
You should not use this facility if you have evidence that the loss of tax and duties has arisen solely as a result of innocent error. You should contact your tax office with your evidence. In circumstances where we accept that the loss of tax is wholly attributable to innocent error, we will not seek a penalty and will restrict recovery of tax and interest to a maximum of the last six years
What happens if I have undeclared liabilities and choose not to disclose?
We are, in our enquiry work, targeting holders of offshore bank accounts by:
- comparing the information already in our possession with customers' UK tax histories.
- making enquiries or investigations where there is a mismatch. Where additional tax is due we will seek higher penalties than the 10 per cent available under this facility. The penalties we seek could be up to 100 per cent and are unlikely to be less than 30 per cent of the tax due.
- continuing to use our powers to obtain detailed information about other offshore accounts, held by UK residents.
- considering, in exceptional circumstances that meet the criteria within our published Criminal Investigation Policy, undertaking a criminal investigation.
Will I ever need to make more than one disclosure?
You may need to. You can make a personal disclosure of your own liabilities and one on behalf of an other (for example a company of which you are a director or as executor for a deceased person). A separate disclosure is required for each capacity if there is more than one. You should use the relevant Disclosure Reference Number (DRN) sent to you with the notification acknowledgement letter and also shown on the payslip.
What is my Disclosure Reference Number (DRN)?
This is a unique reference number which you need to make your disclosure. You will need it to log in securely online. You also need to quote your DRN whenever you contact us about this facility.
I haven't received my DRN yet or I have lost it. What should I do?
You will receive confirmation of your DRN as soon as possible after notification. If you notified more than 3 weeks ago and have not yet received your DRN or you have lost it, please contact us on 0845 302 1401.
I have already made a notification. Can I now make a supplementary notification in another capacity?
Yes. If you have, for example, made a notification in respect of your personal liabilities and now discover that there are also irregularities in the company of which you are a director an additional notification is required in your capacity as company director. In these circumstances you should telephone 0845 302 1401 and have your existing DRN ready.
What should I do now to prepare my disclosure?
- Read the information in the guidance "Making a disclosure".
- Gather together all relevant information and records for each year where you have undeclared income, profits or gains from any source.
What should the disclosure contain?
Your disclosure must be a full disclosure of all undeclared liabilities, not just those connected with offshore accounts, and contain:
- summaries of tax and/or duties, interest and penalties due.
- details of offshore bank accounts relevant to the disclosure and/or open at 5 April 2006.
- details of offshore assets that were held at 5 April 2006.
- an offer to pay
- a declaration that the disclosure is correct and complete.
- payment of the full amount disclosed, including interest and a 10 per cent penalty.
When it is connected in some way to a loss of UK tax.
I have very complex tax affairs and am concerned that I may not be able to meet the 26 November 2007 deadline. What should I do?
It will depend on the circumstances. Exceptionally, in very complex cases where every effort has been made to complete the disclosure in time for the 26 November 2007 deadline, it may be possible to negotiate an extension with HMRC. However, HMRC would expect a substantial payment to be made on account by 26 November 2007. You can contact us on 0845 302 1401 to discuss if this becomes a possibility.
Calculating what you owe
Will HMRC calculate the taxable figures and the liability for me?
No. We are unable to do this for you. HMRC provides information about tax rates, rate bands, thresholds etc and an aid to interest calculation. But we are unable to calculate your figures. You may want to get independent professional advice to help you do this.
How do I calculate what I owe?
You must include all undeclared UK tax liabilities – not just those connected with the offshore account. No disclosure should go back more than 20 years.
Your disclosure should include all unpaid tax and duties for years back to and including 2001/02.
For 2000-01 and earlier you need not provide information for a year in which the unpaid tax and duties were trivial.
Further step-by-step guidance can be found in the guidance "Making a disclosure".
I don't have complete records, what do I do?
If your records are incomplete you should make your best estimate of the undeclared income and gains and use this to make your disclosure by the 26 November 2007. We may ask you to justify any estimates you have used. HMRC appreciates the particular difficulty in obtaining missing bank statements. We expect that in the vast majority of cases it will be possible to make reasonable estimates on the basis of recent statements. HMRC would only expect you to obtain further statements where you are unable to make reasonable estimates from the records available to you.
I have relied on the use of estimates. What if my disclosure is found to be materially incorrect or incomplete?
If, exceptionally, despite taking reasonable care, your disclosure is found to be incorrect or incomplete, HMRC will require the additional tax and interest. Only if omissions from your disclosure are found to be material will we consider seeking more than a 10 per cent penalty. Only where HMRC is satisfied that the disclosure has been made dishonestly will we consider a criminal investigation.
Am I entitled to any deduction in calculating undeclared income, profits or gains?
In some situations you may be able to claim deductions and reliefs. Ask your tax adviser if you need help or phone us on 0845 302 1401.
Are any current HMRC policies withdrawn or affected for disclosures using the Offshore Disclosure facility?
Apart from those specifically referred to in the Offshore Disclosure Facility guidance, HMRC are applying their normal policies.
What rates of tax apply?
Our table below sets out the rates of tax to use in particular circumstances. Apply the correct rate of tax and/or National Insurance contribution rates against the income, profit or gain for each year.
| Circumstances | Rate of tax now payable |
| If you have paid tax at the higher rate in a year when liability was not disclosed | Higher rate |
| If you pay tax at the basic rate in a particular year | Basic rate until your income exceeds the threshold for the next rate band |
| Trustees and personal representatives | Appropriate rate |
| If money has been borrowed from a company by a director or shareholder. | This is a complex issue. We suggest you ask a tax adviser |
Interest and Penalties
What interest do I have to pay?
Interest runs from the date when the tax should have been paid until date of payment for all years involved. We are providing tables of interest factors for use with this facility only to help you.
Interest is not charged for VAT periods starting before 1 April 1990. Furthermore interest on late paid VAT is limited to the latest 3 years. For later VAT periods the interest runs from the date the VAT should have been paid.
What penalty do I have to pay?
Calculate and apply the penalty which is fixed 10 per cent of the undeclared tax/duties and National Insurance contributions. But if the total amount of undeclared income, profit or gains is less than £2,500 you need not pay a penalty. Do not apply the penalty to the interest.
The Offer
Why do I need to make an offer?
It is a condition of this facility that you make a offer to us for the full amount of taxes, duties, interest and penalties. Together with our acceptance letter to you, this creates a contract between us.
Payment
How do I pay?
Full payment is due with your disclosure by 26 November at the latest. The most secure payment method is electronic transfer. Alternative methods are available. See table below or view information online.
| Decide which payment method to use - payments must reach us by 26 November 2007, at the latest (for all payment methods you will need the information on the payslip we send you) |
About the payment methods |
| By Debit card over the Internet (BillPay) | Available online |
| Through your bank using Internet or telephone banking, BACS or CHAPS | Make these arrangements through your own bank using the information on your payslip. |
| At your bank | Take your payment and payslip to your own branch of your bank who will arrange a Bank Giro transfer |
| At the Post Office | Pay by cash, cheque or debit card over the post office counter |
| Pay by cheque or bank draft | Make it payable to HM REVENUE & CUSTOMS Post it, with your payslip, to: HM Revenue & Customs Section 10 Accounts Office BRADFORD BD98 1YY |
What if, exceptionally, I cannot pay the full amount by 26 November 2007?
Contact us as soon as possible on 0845 366 1202. When you ring make sure you have:
- your Disclosure Reference Number and paperwork
- full information about your assets and liabilities, and
- your proposals for how you will clear the debt.
This will help us determine how to address the issue. Do not submit your disclosure or payment until you have spoken to us.
Submitting the disclosure
Will I receive an online acknowledgement of my disclosure?
Yes, if you disclose online. We will also send you confirmation by post as soon as possible and at the latest within four weeks of receiving your disclosure.
The Offshore Disclosure Facility FQA
What happens once I submit my disclosure?
The disclosure will be considered within the terms of this facility. We expect most disclosures to be self-explanatory but we may need to contact you or your tax adviser, if you have one, to clarify any points. You may also be asked to provide appropriate evidence of your circumstances to satisfy us that your disclosure is complete. Your full co-operation is one of the conditions of using this facility and non co-operation may jeopardise acceptance of your offer.
Accepting your disclosure
Will my disclosure be accepted?
We expect the vast majority of disclosures to be accepted. We will send you a letter accepting your offer as soon as possible and by 30 April 2008 at the latest.If we cannot accept the disclosure we will open an enquiry in the normal way before 30 April 2008. It is also possible that in exceptional circumstances a disclosure may be considered in accordance with our published criminal investigation policy. In these cases, the material in the disclosure could be used in evidence against you.
Meeting future obligations
What do I do about declaring future liabilities?
Please be sure to enter all future income, profits or gains on the relevant Tax Returns. Income Tax 2006-07 is not within this facility, so make sure you complete a tax return with the appropriate supplementary pages. This facility allows for the disclosure of undeclared VAT for all VAT periods that end in the year to 5 April 2007. You should ensure VAT returns for periods that end after 5 April 2007 are complete and correct. Employers should include all relevant payments in their payroll, pay future PAYE liabilities as they fall due, and include them on their Employer Returns.
Domicile
I am considering whether to make a disclosure. Is my domicile status relevant?
It may be. Your domicile can affect your liability to pay UK tax on overseas income or and gains. If you are UK resident but not domiciled here, the only offshore income and gains you usually pay UK tax on is the amount that you bring or transfer to the UK. So, if you have not brought or transferred any income or gains into the UK, you may not have any additional UK tax liabilities to disclose.
However, even if you are not domiciled in the UK, you will need to consider making a disclosure if:
- you have any undeclared income arising in the Republic of Ireland, whether or not you have brought or transferred it into the UK (because different arrangements apply for the Republic of Ireland)
- you have brought or transferred income or gains from overseas into the UK without declaring it and paying the appropriate tax
- the offshore account includes deposits of income or gains that arose in the UK that you have not previously declared to us.
I am not sure of my domicile status. What should I do?
Domicile is not the same as nationality or residence. Broadly speaking, you have your domicile in the country that is your 'real' or permanent home. Everyone acquires a domicile of origin at birth. This is generally the country that your father considered to be his 'home country' at the date of your birth. If you have a domicile of origin outside the UK, then this is likely still to apply unless you have chosen to remain in the UK permanently or indefinitely. In most cases an individual's domicile is obvious.
If you are not sure of your domicile you may want to seek advice, especially if you think that your circumstances are complex. If you do not have a professional adviser, you can telephone us on 0845 302 1401 (international +44 1506 476 094) and a call back will be arranged.
Employer issues
I am also an employer and I have found that I should have operated PAYE on certain payments to employees, etc but did not. What should I do?
Calculate the tax and National Insurance Contributions (NICs) payable on payments to employees (either in cash or non-cash form) for each year and include these on paper form DS108 or the Employer Liabilities - Details page online together with:
- interest on the tax and NICs for each year, and
- a penalty for each year, calculated at 10 per cent of the unpaid tax and NICs
Please note: there is no statutory obligation to pay Class I or Class IA NICs for years prior to 2001-02 but they can be paid on a voluntary basis.
I have found additional expenses or benefits in kind that I have not declared on my employer returns. What should I do?
Your employees (including ex-employees) are strictly liable to pay the tax arising but you will be liable for any Class 1 or Class 1A NICs arising. Calculate and account for any Class 1 or Class 1A NICs in accordance with the guidance under the questions below. Provided you exclude any directors, you can volunteer to pay your employees' tax liabilities on a 'grossed up' basis.
By volunteering to pay your employees' tax liability a further charge to NICs needs to be calculated on the grossed up liability for the year of settlement. See Tax Bulletin 77/05. See booklet 480 Expenses and benefits – a tax guide for more help about expenses and benefits.
How do I calculate the tax due on a grossed up basis?
'Grossing up' is the method used to calculate the additional tax that is due from employee(s) on benefits/expenses that are outside the scope of PAYE, which the employer has agreed to pay. To work out the full amount of tax that is due, gross up the total benefit charge on employee(s) at their marginal rate for the year of settlement.
First, work out the tax due on undeclared benefits/expenses (outside the scope of PAYE) paid to employees for all years; together with any Section 223 tax you are paying (see ."What if I have failed to operate PAYE for a company director?"). Then gross this up at the employees/directors' marginal rate for the year of settlement (2007-08) using the formula.
100/(100 less marginal tax rate)
Example: If you paid benefits/expenses of £5,000 to employees who are liable at the higher rate in the year of settlement (currently 40 per cent), gross up the tax due from the employees.If the employees who received the benefits/expenses are a mixture of basic and higher rate taxpayers, you will need to make a realistic assessment of the split and apply the appropriate grossing up formulas to each group.
The total grossed up tax for all years and the National Insurance contributions on it (see "How do I calculate NICs on the grossed up tax?") should be entered on paper form DS108 or the Employer Liabilities - Details page online.
How do I calculate NICs on the grossed up tax?
NICs should be calculated on the grossed up figure of tax using the appropriate rates for 2007-08. NICs on grossed up tax should be included on paper form DS108 or the Employer Liabilities - Details page online.
I have found additional expenses or benefits in kind paid to directors which have not been declared/included on my employer returns. Can I include these in my voluntary settlement of employee's liabilities?
No. Where a director received additional benefits in kind, you will need to advise the director of the additional value of the benefits arising in each year. You should also make a disclosure that there are additional benefits/expenses made to director(s) that have not been included in your P11D returns by ticking the appropriate box on paper form DS110 or the Disclosure Details page online. We will contact you at a later date for details. Please note: You are liable for payment of any Class 1 or Class1A NICs due in connection with the expenses or benefits in kind. These should be accounted as set out in the answer to "I am an employer and I have found that I should have operated PAYE on certain payments to employees, etc but did not. What should I do?"
I do not wish to pay my employees tax liabilities arising on the benefits/expense payments. What should I do?
Tell your employees about the additional benefits in kind arising in each year. Also tick the appropriate box on paper form DS110 or the Disclosure Details page online to make a disclosure that there are additional benefits/expenses payments that have not been entered on P11D returns. We will contact you at a later date for details.
What if I have failed to operate PAYE for a company director?
When an employer pays tax that they failed to deduct from the remuneration of a director who has a material interest in a company then, unless the director makes good the tax to the company, an additional tax charge will arise on the director as set out in Section 223 of Income Tax (Earnings and Pensions) Act 2003. See booklet 480 chapters 19.
The director will strictly be liable to pay the tax arising. But you can volunteer to settle this liability on the director's behalf on a 'grossed up' basis. If you want to do this, calculate and account for the grossed up figure by following the steps in the answer to "How do I calculate the tax due on a grossed up basis?".
If you do volunteer to settle the liability on your director's behalf, a further charge to NICs needs be calculated on the grossed up liability for the year of settlement following the guidance at "How do I calculate the tax due on a grossed up basis?". For more help look at Tax Bulletin 77/05.
I either do not have complete records or it would be very time consuming to extract full details from the records to work out how much I owe? What should I do?
Where the employer's records are insufficient or unavailable for the periods required, the only option is to estimate the earnings and the liability due. Where full records are available it can still be time consuming for all concerned to use detailed extracts. Where that is the case you should consider using an estimated computation to save time, but estimates of earnings are not appropriate if:
- records are available, and
- you believe the employees' earnings may fluctuate around the lower earnings limit (LEL) for National Insurance contributions.
Companies
How are liabilities to be calculated on sums borrowed from a company by director/shareholder? (S419 ICTA 1988)
This issue is complex and you should consult the professional adviser who prepared the company's accounts. Further information is available below.
How do I disclose the company's liability under S419 lCTA 1988?
Make sure your choices on the Select Forms page online include Company Liabilities or complete the paper form DS107. The company will incur S419 liability for each accounting period in which the amount lent increases. Enter the Section 419 liability incurred by the company in each of the relevant accounting periods together with interest on that amount and the penalty of 10 per cent of the liability.
What if all or part of the loan is repaid to the company?
Where the previous lending is reduced interest should be calculated from the due date for the accounting period in which the loan was made to the date the loan, or part of it, was repaid.
Where the loan balance reduces the company will be entitled to S419(4) relief for the accounting period. This will not affect either the online or paper forms. This relief will be given in the letter of offer.
What letter of offer do I need?
The letter of offer provided can be used for all corporation tax liabilities including S419 except for companies where there has been a net loan repayment during any accounting period and relief is due under S419(4). For a different letter of offer to suit your circumstances please telephone 0845 302 1401. You can still complete your disclosure online but you will need to send in the letter of offer separately by post.
How do I complete the letter of offer?
The letter of offer you complete online or using paper form DS112 should show the total amount of corporation tax, S419 liability, interest and penalty.
How do I account for the loans in the next company accounts?
You should show the revised loan balances in the next company accounts.
How does the company get S419(4) relief for repayment of loans after the period of the Offshore Disclosure Facility?
The company should contact its HMRC office to claim the relief.
Inheritance Tax
I have Inheritance Tax (IHT) issues, what should I do?
If the liability being disclosed arose from a gift or inheritance on which IHT is payable, interest is due from the date the IHT became due until the date it is paid. For more about IHT go to the IHT information page. IHT may be relevant where someone has acted as an executor for an estate, or as a trustee of a trust.
Deceased Persons
The person who held the offshore account is deceased. Should the executor or administrator make a disclosure?
Yes. The executor or administrator is responsible for the estate of the deceased. Different time limits may apply and no penalty will be payable on liabilities up to the date of death. You may wish to ask your tax adviser. You will also need an appropriately worded letter of offer. Please phone us on 0845 366 1202 to get one.
Tax Credits
What if I or my partner are receiving Tax Credits or have recently made a claim for Tax Credits?
You should still make a disclosure but also tick the appropriate box on paper form DS110 or the Disclosure details page online. The information will be passed on to the Tax Credit team for them to consider. You will be notified separately of any changes that may be required to the amount of Tax Credits you receive or have received for the relevant year(s). If you have made a joint claim to Tax Credits you may wish to tell your partner that the Tax Credit award may be adjusted as a result of your disclosure.
Source:HMRC
