Wednesday, June 13, 2007

Offshore Disclosure Facility Looming

The 'Offshore Disclosure Facility' outlined in previous posts is now looming. Basically if you have an offshore account with undeclared taxes due you have until the 22nd June to declare it, pay your taxes and a 10% fine. If not and the Revenue investigate, you will pay tax and up to 100% of the overdue taxes as a fine.

It is important for you to consider your options if you are in this situation. Many have seen it as another example of a nanny state, but in essence, it is just collecting the taxes that are legitimately owed. We would recommend that those who would be caught by the ruling should declare their situation and then plan correctly after the event.

So many clients that we come across have been sucked into the thoughts, by unscrupulous 'offshore advisers', that setting up a company to own your account is enough. In some cases this can be an efficient way of doing things but it has to be done correctly and to the letter of the law in your jurisdiction.

It appears that governments across the world are putting huge resources into finding offshore funds and bringing those who seek to evade taxes to book, this is why the time has never been more important to make sure that if offshore planning is on your agenda that you seek the advice of a professional. It may be expensive but you can bet you bottom tax Dollar (or Pound or Euro) that the tax authorities will become ever more inquisitive and ever more sophisticated at discovering offshore funds.

With money laundering being a huge fear of all legitimate banking institutions and professionals, the governments around the world have an extra tool to prize information from banks, and they will. Just as the RICO statutes in the US were used to bring down investment bankers (they were designed to combat the Mafia) you can be sure that legislative tools that are designed to combat money laundering and terrorism will be used to gain access to other information. It is the inevitable collateral damage of the information age.

So what can you do? Each persons situation is different, however, if you are employed you should be looking at tax deferral vehicles more than tax avoidance vehicles. If you are earning money from a job or a business and you are resident in the UK then it should be taxed and there is, pretty much, no way around it. Where you can plan correctly is your investments in property and equities etc. Capital Gains are a consideration here, if you are able to have some of that tax deferred until you either move to a less taxing jurisdiction or as part of inheritance planning then offshore insurance bonds may suit. If you are a company owner or a high earner then you may consider putting money and equity into a trust. The AIM market has excellent tax benefits for investors and also EIS schemes and VCT's should be considered. Of course, in extreme cases, there is always Switzerland or Monaco where the tax regime is less onerous.

Whatever your situation, if you believe there is room for you to save on the tax you pay then you need to take professional advice and be very upfront and honest with your advisers so that they can take into account your whole situation.

There will be many who get caught by this ruling and the information that has been gathered about bank accounts through EU disclosure rules, some will suffer, some will take it as an opportunity to have a clean slate and then plan accordingly going forward.