UK Government Extends Offshore Tax Amnesty Deadline To Jan 4
By Laurence Norman, Of DOW JONES NEWSWIRES
LONDON -(Dow Jones)- The U.K. government will extend a tax amnesty deadline
for offshore accounts by five weeks in a move tax experts say may not be enough
to make the amnesty a success.
A government official said the deadline for disclosing that unpaid taxes are
owed will be extended to Jan 4. It was originally due to expire on Nov 30.
Individuals then have until March 12 to pay what is owed.
A spokesman for Her Majesty's Revenue and Customs agency said, "The reason we
have extended the deadline is to allow more time for banks to write to their
customers. This is what they have told us they need."
The New Disclosure Opportunity amnesty started on Sept. 1 and was part of a
broader effort by the U.K. and other leading governments to crack down on
offshore tax havens.
Amid the global recession, cash-strapped governments have launched a series of
efforts to stamp out tax evasion and avoidance in a bid to replace lost tax
revenue and reduce deficits.
Under the amnesty, individuals with offshore accounts must pay all outstanding
taxes and duties, interest and penalties plus 10% penalty of the unpaid amount.
That's a much lower penalty than would be imposed if someone were successfully
prosecuted.
HMRC believes there are some 400,000 offshore accounts held by U.K. residents
of which only around 20%-25% are estimated to owe back taxes.
A similar amnesty, in 2007, was a considerable success, with around 45,000
residents returning some GBP400 million of unpaid taxes.
For HMRC, the amnesty is a better way to raise revenues than seeking to
prosecute thousands of individuals. It's believed there have been almost no
prosecutions of those who didn't comply with the 2007 amnesty offer.
The government official insisted the extension of the deadline wasn't a sign
few people were coming forward, saying many of the 308 banks and other
institutions that had been ordered to provide information about accounts had
already written to clients informing them about the amnesty.
However tax experts questioned the success of the amnesty and said it may need
a much longer deadline extension for HMRC to get a large number of people coming
forward.
Chris Oates, a partner at Ernst & Young specializing in tax controversy, said
what worked well in 2007 was HMRC writing to individuals and warning them the
agency knew about offshore accounts and that they should pay up.
This time, HMRC has written only 31,000 letters to individuals so far--much
fewer than the 100,000 accounts with unpaid taxes they believe exist.
Oates said that since a number of institutions are challenging HMRC's right to
demand the information, the amnesty deadline would need to be extended by months
for the agency to receive all the information it needs from the banks, sift
through it and send out letters to individuals warning them to comply.
"To extend it significantly is the only way this is going to work," he said.
An HMRC spokesman acknowledged the agency may not be able to write to everyone
who may have undisclosed accounts by the new deadline. However they said that,
in part due to a more extensive media campaign, they were confident about take-
up of the amnesty.
"We planned for this and have been running a parallel advertising campaign to
reach a wide audience," the spokesman said.
The new amnesty offer deadline falls a few weeks after Chancellor of the
Exchequer Alistair Darling delivers his pre-budget report statement.
The government has frequently used budgets to tighten rules to stop tax
evasion and avoidance and U.K. Treasury Minister Stephen Timms said in September
a further "program of work" will be taken "to strengthen the disclosure regime."
-By Laurence Norman, Dow Jones Newswires; 44-207-842-9270; laurence.norman@
dowjones.com
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