The deadline for registering an intention to make a disclosure has been extended to 4 January 2010.  Once registered, the deadlines for making the disclosure and paying the tax, interest and penalties remains the same.  These are 31 January 2010 for a paper declaration and 12 March 2010 for online submissions.

HM Revenue & Customs is clearly mounting a serious assault on offshore tax evasion and, in addition to obtaining details from hundreds of offshore institutions, it is now threatening two further very serious measures to “encourage” compliance.

Firstly, it will legislate to treat offshore non-compliance on an equal footing as deliberate non-compliance under FA 2007, Schedule 24.  This will rule out the scope for careless or innocent error and therefore provide a minimum penalty of 35%.  It is extremely unlikely that the minimum penalty will be enforced and depending on the circumstances, penalties could be 100% of the tax.

Secondly, it proposes to introduce a requirement to notify HMRC of offshore bank accounts with effect from 1 April 2011.  Failure to comply could result in a tax-geared penalty up to 100%.  Please note this is in addition to the above penalty and therefore the penalties alone could be 200% of the tax.

Penalties of 200%, together with interest, the professional fees in agreeing the settlement, and of course the tax that should have been paid, could easily be double the income which should have been declared.

The New Disclosure Opportunity, with its 10% penalty, is looking more and more attractive.

Anyone needing to make a disclosure to HMRC should carefully consider whether the NDO is the right option. HMRC reserves the right to prosecute, but it is anticipated that in all but the most serious cases, the NDO offers a route to make good any unreported tax liabilities.  Specialist advice in approaching HMRC is essential.