The Offshore Disclosure Facility

10 October 2007 

Following the closure of the Offshore Disclosure Facility (ODF) on 22 June 2007 many have asked whether it was the right thing to disclose previously untaxed income.

On the face of it the 10% penalty to bring your tax affairs up to date seems quite reasonable, especially when HMRC are entitled to charge up to a 100% penalty. With normal voluntary disclosures, usually known as Code 9 cases, penalties of around 30% are negotiated for suspected serious fraud cases and between 10 and 20% for less serious cases.  However, on further inspection of the terms and conditions of the ODF, was this as good a deal as first thought? 

• Under the ODF, disclosure is for all income and capital gains for the last 20 years.  Normally HMRC only look back six years when reviewing a voluntary disclosure.
• Under ODF, all undisclosed tax has to be established by 26 November 2007.  Under Code 9 this could take up to two years, therefore the ODF does not allow time for a full detailed investigation to take place.
• The ODF does not guarantee that a tax payer will not be prosecuted for any disclosure.  Under a Code 9 investigation (especially in a serious of case of fraud/negligence) the tax payer can have a guarantee that they will not be prosecuted unless they make false statements in the disclosure.

So what happens now after the passing of 22 June 2007? 

HMRC has collected a large amount of information from individuals and banks and will start work on these investigations beginning with the most serious cases which are likely to fall into the Code 9 Category.

HMRC will continue to use their self-assessment powers to review earlier years returns to weed out any irregularities on individuals self-assessment returns.

If you require any further information in respect of the Offshore Disclosure Facility, please contact David Gough at Chancery.