Paradise disclosed!

By Clare Munro, Tax Partner
claremunro@lubbockfine.co.uk
020 7490 7766

The news this week is full of indignation about the so-called Paradise Papers (arising primarily from the files of the offshore provider Appleby), much of it ill-Informed. What's frequently neglected in the reporting is that increased transparency with automatic information exchange has made tax evasion by concealment almost impossible.

Some commentators have mentioned that many jurisdictions have put disclosure facilities in place in order to encourage residents to get their affairs in order and pay any tax due. Here in the UK HMRC have had several initiatives designed to do exactly this. The current initiative aimed at UK residents with liabilities arising from offshore income or assets, is known as the Worldwide Disclosure Facility. It allows UK taxpayers with offshore liabilities to disclose and pay whatever is due. This facility runs through to September 2018 when HMRC will take a much tougher approach, with a new set of draconian penalties, particularly for anyone with undisclosed offshore liabilities. 

September 2018 is also the deadline under the new “Requirement to Correct” provisions, at which point the penalty for an offshore tax liability (or where undisclosed UK income has been transferred offshore) will be a minimum 100% of the tax, with more cases expected to reach nearer to the maximum 200% unless a reasonable excuse can be established. HMRC expect to launch a form of clearance procedure where there is genuine uncertainty soon after the current Finance Bill receive Royal Assent (expected later in November).

In the meantime, those who come forward voluntarily are always entitled to a lower range of penalties and so we would encourage anyone who thinks they may have tax 
liabilities to disclose, whether on or offshore (or would simply like a second opinion), speak to Clare Munro claremunro@lubbockfine.co.uk, Phil Moss philmoss@lubbockfine.co.uk or Steven Pinhey stevenpinhey@lubbockfine.co.uk about the most appropriate way forward.

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