HM Revenue & Customs (HMRC) looks set to offer a second "amnesty" to those who owe tax on bank accounts overseas - a move which could undermine any incentive for tax evaders to volunteer their liabilities in future, says PKF Accountants & business advisers.
The move comes as HMRC receives the final payments from the first Offshore Disclosure Facility (ODF) earlier this year. Those who volunteered under this scheme had to pay the tax owed, interest and a 10% penalty.
John Cassidy, Tax Investigations Partner at PKF, says, "There would be no logic to setting the penalty for a second ODF at the same 10% level and still allowing those who ought to have come forward the first time to use the new facility. Where is the incentive to come forward now rather than wait until a later exercise? There is a serious danger that such exercises will stop being taken seriously if they happen every year without change.
"What I think is needed is an updated model. The priority must be to incentivise more people to come forward and there are certainly lessons to be learnt from the first exercise. For instance, HMRC asked people to calculate and disclose unpaid tax as far back as 20 years which I believe dissuaded many people from utilising the facility. They either didn't have the old records anymore or it was simply such a daunting task that they would rather risk not disclosing.
"Reducing the length of time to be investigated to six years, perhaps counter-balanced by a different penalty structure, would provide a much greater incentive to people, which is the key issue. The more people come forward, the more tax arrears HMRC will collect -it should give more to get more."
John Cassidy or another PKF specialist tax investigations team members can be contacted by calling 020 7065 0000.