News - Andrew Webster Limited

In a major change of heart the Chancellor has announced an emergency measure to counteract the political fallout from the abolition of the 10% tax rate in the 2007 budget. Personal allowances will be increased by £600.

In his first full budget speech since becoming Chancellor, Alistair Darling spent 51 minutes without announcing many significant tax changes other than those already trailed in the pre-budget report. However as always there was more to report in the huge package of technical information which was released at the same time.

The new Chancellor Alistair Darling delivered his first pre-budget report. Although the general tone of the commentary has been that this was a pre-election budget without an election - we believe that there are significant opportunities for tax savings for clients who move quickly.

After many years the case which has brought huge uncertainty to the small business sector has been decided. The case was decided against HMRC - so the present law is established as being what everyone (other than HMRC) thought it was.

However HMRC have not accepted defeat- so it has already been established that new legislation will be introduced. Our view is that this is what should have been done in the first place if it was felt that the present legislation was unfair. However there is a continuing period of uncertainty until the new legislation is introduced.

Following their success in a number of recent legal cases, HMRC have been able to obtain information from a number of banks and financial institutions detailing the banks' customers who hold offshore bank accounts.

They have now announced an "amnesty" whereby individuals who have undisclosed tax liabilities arising from unreported offshore accounts (and in fact from any other source) may voluntarily disclose this information to HMRC - subject to certain terms and conditions - and be subject to reduced penalties on the outstanding liabilities. You will still have to pay the full amount of any tax.

Essentially, if you make a disclosure under the terms of the Offshore Disclosure facility (ODF) and subject to the deadlines imposed on that facility and if that disclosure is accepted by HMRC* you will get:

A fixed penalty of 10% of the tax/duties you have underpaid (the penalty outside the facility can be up to 100% and is rarely less than 30%); and
No penalty will be imposed on disclosures where the untaxed amounts total less than £2,500.

Who is affected by this?

The ODF 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, so it includes accounts in Channel Islands, Isle of Man and Republic of Ireland.

Whilst you cannot use the ODF to disclose unreported liabilities if you do not have an offshore account, the terms of the disclosure facility will be extended to the disclosures of all unreported liabilities to your tax office, within the deadlines and subject to the acceptance conditions, so that these too will benefit from the fixed penalties. It is therefore an excellent opportunity to put right problems that there have been in the past.

If you or anyone you know has an undeclared tax liability arising from an offshore account (or any other source) we would advise you to make a managed disclosure of all undeclared liabilities under this facility under our guidance.

What if I have an offshore account but I am not liable to UK tax on it because of my domicile?

The facility is not open to persons who don't hold an offshore account connected with a loss of UK tax/duty. Therefore if you are non-UK domiciled and you have not remitted monies from your account to the UK and you have declared your non-domiciled status on your tax return you do not need and in fact are not entitled to make a disclosure under the terms of the OFD.

You should note however that, if you have undeclared income arising in the Republic of Ireland this may be taxable even if you haven't remitted it to the UK since different rules apply.

If however, you have remitted monies to the UK and not declared and paid the tax on this you should make a managed disclosure under this facility.

If you find you do have a disclosure to make you must notify HMRC of your intention to disclose by 22 June 2007 using form DS102.

You must then make a full, accurate and complete disclosure and pay the liability (including interest and the 10% penalty) by 26 November 2007. The disclosure must be made on the appropriate forms in the range DS103 to DS111.

HMRC will notify you by 30 April 2008 at the latest whether they accept your disclosure.

Once the notification period has closed on 22 June 2007 HMRC will be pursuing and enquiring into the affairs of individuals on the lists they have received from the banks and financial institutions who have not disclosed.

For this reason the advice we offer to anyone who has an undeclared tax liability, particularly if it is in reference to an offshore account, is to make a properly managed disclosure.

How can Andrew Webster Limited help?

You can notify HMRC yourself under the disclosure rules. We believe that there is a benefit in using a professional firm to assist in the proper management of this disclosure and the calculation of the liability to be settled. We can make sure that you disclose only the right amount of additional tax, taking the benefit of any reliefs which are available. A well presented report is essential to give HMRC confidence that all matters have been dealt with. At Andrew Webster Limited we are experienced in managing disclosures for clients to achieve the best possible outcome. The largest we have dealt with involved profits of more than £800,000 which had not been declared. Within a well presented report it is often possible to put the facts in the most positive light which persuade HMRC to accept our view on a matter which is contentious. Our Managing Director is a former senior Inspector of Taxes responsible for investigation work within Cambridge.

Please contact us if you require any further information, or to set up a meeting.

Wednesday 21st March saw Gordon Brown deliver his tenth and final budget. The surprise announcement near to the end of this Budget statement was a decrease in the basic rate of income tax from 22% to 20% from April 2008, although as always with Gordon Brown Budgets there is a lot of small print and the effect of this will by no means be good news for everyone.

Changes in Corporation Tax rates - reduction in the large companies rate but an increase in the small companies rate, which will be a disadvantage to most of our clients.

Changes to the Capital Allowances Regime - a package of changes including the introduction of new allowances and revision of the rates of existing allowances.

Increased Support for Research and Development - both the SME and Large company R&D tax credit schemes have been enhanced. We feel that this means some good opportunities for our hi-tech clients.