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Business Tax  •  Enquiries  •  HMRC  •  Personal tax  •  Taxation

If you have underpaid tax, it’s time to get your affairs in order

By RJP LLP on 23 May, 2013

Earlier this month it was confirmed by HMRC that all UK overseas territories - The Cayman Islands, Anguilla, Bermuda, the British Virgin Islands, Jersey, Guernsey, Gibraltar, Isle of Man, Montserrat and the Turks and Caicos Islands – now have in place automatic tax disclosure deals with the Government. This means they are automatically exchanging financial information with the UK and France, Germany, Italy and Spain to identify taxpayers who are under-declaring their income.

Under the terms of these automatic information-sharing arrangements, all the countries involved agree to provide greater levels of information about bank accounts held by taxpayers in UK related jurisdictions. The level of information to be exchanged is detailed and will include names, addresses, dates of birth, account numbers and account balances. It will also include trust fund information and details of payments made into or from accounts or trusts. Back in the UK, in order to validate the accuracy of what is shared, HMRC has a team of specialist investigators working in its Offshore Co-ordination Unit whose job is to review this information and compare it with existing records held, which will for example include tax returns submitted.

In most cases, if HMRC identifies a discrepancy, the taxpayer will have the chance to make a disclosure before a full investigation is launched. If this happens, HMRC will follow the Contractual Disclosure Facility investigation process. This means that if there is a tax underpayment, you could be liable to pay up to 200% of the tax liability arising. You may also lose the right to anonymity - we have all seen HMRC’s lists of its ‘most wanted’ taxpayers publicised in the media.

It is clear that the Government intends to continue its efforts to reduce tax avoidance and identify every possible opportunity to secure additional revenues for the Treasury, in order to reduce the Budget deficit. Our advice to clients with offshore accounts is to ensure they have declared all income generated. If they have not already done this, then they should take full advantage of the potential to make a voluntary disclosure to HMRC. Making a voluntary disclosure of tax underpaid will ensure you do not face excessive penalties for tax evasion. It can also reduce the threat of a full investigation being launched, together with the potential for a criminal prosecution. When making a voluntary disclosure, you can expect to pay a fixed penalty of up to 20% of unpaid tax in addition to the amount of underpaid tax that is outstanding, and the interest arising on that underpaid tax.

If you think you may have under-declared your income and owe additional tax to HMRC, please contact us. We can advise you on the best way to make a voluntary disclosure and help you to get your tax affairs in order. Contact Lesley Stalker by emailing las@rjp.co.uk.

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31 July 2020 - Normally an important deadline!

All taxpayers due to make self-assessment tax payments on 31 July 2020 can now delay their payment due to the disruption caused by Coronavirus. This includes self-employed taxpayers and also company directors who pay self-assessment tax on dividend income.

Read more in our coverage of Coronavirus and business support from the Government.