For those of you who missed previous postings, the NDO and THP were programmes designed to encourage tax defaulters to rectify irregularities in their tax affairs. In exchange for coming forward and paying back taxes, HMRC offered to impose a reduced penalty of 10% instead of the full scale of penalties available under the Law.
So did they work?
Recently HMRC reported that:
· The NDO yielded about £82m from approximately 5,500 disclosures -- an average of £14,500.
· The THP yielded about £9m from approximately 1,500 disclosures – an average of £6,500. One case alone raised £1.2m for HMRC
£100 million in the door but was it a success? And more importantly, can we expect to see more of this approach? Well in the greater context, the THP raised some very interesting questions. Originally, HMRC stated that they had information showing nearly 30,000 medical professionals had undeclared/irregular tax affairs. With only 1,500 disclosures (c.5%), the question remains: what happened to the rest? Commentators have speculated about taxpayer weariness with amnesties. Others have simply pointed out that human nature is such that no one ever thinks it will happen to them. Maybe people know HMRC is under pressure with staff cuts and budget cuts and they just don't think that HMRC really will come calling. The lack of any criminal prosecutions arising from the original Offshore Disclosure Facility in 2007 certainly did not have motivate taxpayers to straighten out their affairs.
Despite the poor showing, HMRC are determine not to give in however. A spokesman issued the following statement: "Most interesting has been the sources of income revealed by disclosures - we now know of several specific new sources of information linked to undeclared incomes for doctors and for dentists."
Certainly no sign that HMRC intend to back away from the medical profession.
So what about the NDO? The disclosure Facilities (original and new) arose out of the vast quantities of information which HMRC managed to extract on offshore account holders. The major problem in fact was they got more than they bargained for. Allocating resources to handle the information flowing into HMRC against a backdrop of staff cuts probably stretched HMRC to the limit. So instead of HMRC allocating resource they decided to incentivise the taxpayer to do the work for them in return for reduced penalties. And so the Offshore Disclosure Facility, the UK's first tax "amnesty", went live in 2007.
The original Disclosure Facility pulled in £450 million of unpaid tax. The New Disclosure Facility however was nowhere near as successful pulling in "only" £82 million. Of course the Lichtenstein Disclosure Facility is on going until 2015 so it is difficult to know what impact the LDF had on the NDO. Time will tell.
For those who missed the THP or NDO
For those who did not manage to disclose before the deadline all is not lost. HMRC continue to look much more favourably on voluntary disclosures than they do on those taxpayers who adopt a wait and see approach. While the penalties for voluntary disclosure will be in excess of the 10% offered under the THP/NDO, they should in most cases be well be lower than the maximum that can be imposed under the Law. If you need to make a disclosure, speak to a professional straight away.