The UK is to impose a stringent new anti-avoidance regime on individuals with undeclared offshore income, with increased penalty rates designed to act as a powerful deterrent.
From 6 April, 2011 - the start of the UK's 2011/12 tax year - penalties for offshore non-compliance relating to the payment of income and capital gains taxes will be linked to the tax transparency of the country involved. There are to be increased penalties for under-declared income and gains from a variety of territories, which are henceforward to be grouped into one of three categories, based upon their information sharing agreements with the UK.
The categories and penalties are as follows:
These new penalty rates will first apply to Self Assessment returns concerning the 2011/12 income year, which are to be filed by January 31, 2013.
Commenting on the changes, David Gauke, Exchequer Secretary to the Treasury, said: "The time is running out for anyone going offshore to evade tax. Get your tax affairs in order, or face the risk of a penalty worth up to 200% of the tax evaded".
David Hartnett, Permanent Secretary for Tax at HM Revenue and Customs (HMRC), added: "This is the next step in increasing the deterrent against offshore non-compliance - and those who decide to take the risk will feel the full force of HMRC's new penalties".
From 6 April, 2011 - the start of the UK's 2011/12 tax year - penalties for offshore non-compliance relating to the payment of income and capital gains taxes will be linked to the tax transparency of the country involved. There are to be increased penalties for under-declared income and gains from a variety of territories, which are henceforward to be grouped into one of three categories, based upon their information sharing agreements with the UK.
The categories and penalties are as follows:
- Category 1 includes the UK itself, and territories which automatically exchange information on savings income with the UK. If non-compliance is found in such an instance, the penalty rate will be 100% of the tax owed, representing no change from the current fee levied.
- Category 2 affects territories with exchange information upon request, and those least developed territories with which the UK does not share information. Here, the penalty is to be 1.5 times the current rate, equivalent to a rate of up to 150% of the tax owed.
- Category 3 relates to territories that do not exchange information with the UK, and those territories whose existing agreements with the UK do not comply with international standards. Such a penalty will be charged at up to 200% of the tax owed.
These new penalty rates will first apply to Self Assessment returns concerning the 2011/12 income year, which are to be filed by January 31, 2013.
Commenting on the changes, David Gauke, Exchequer Secretary to the Treasury, said: "The time is running out for anyone going offshore to evade tax. Get your tax affairs in order, or face the risk of a penalty worth up to 200% of the tax evaded".
David Hartnett, Permanent Secretary for Tax at HM Revenue and Customs (HMRC), added: "This is the next step in increasing the deterrent against offshore non-compliance - and those who decide to take the risk will feel the full force of HMRC's new penalties".
