You cannot win on penalties
ANYONE WITH a potential liability to UK tax who has investments in Israel (bank account, insurance product, investment fund, property or otherwise) and has not declared income and gains to HMRC should now urgently consider whether they need to take steps to regularise their affairs.
Over the past few years, the tax world has become increasingly small, with HMRC receiving publicity for its deals with both Switzerland and Liechtenstein in particular. In 2017 it looks to get smaller still, as the agreement to exchange tax information between more than 100 countries take effect.
Led by the OECD, and also known as common reporting standards, this agreement will require financial institutions in the signatory countries to collect and forward information to its account-holders’ home countries for taxation purposes. Fifty-four nations will commence exchanging information in 2017, with the remainder joining in 2018.
ISRAEL LOOKS SET TO JOIN THE PARTY
Israel had originally confirmed it would implement the legislation to exchange tax information in 2018. However, on January 1 this year, the Israeli foreign ministry confirmed the exchange would instead start before the end of 2017. While the enabling legislation has yet to be approved by the finance committee of the Knesset, it is assumed these provisions will pass into law in the foreseeable future.
HMRC has made it very clear that it will pursue anyone, to the fullest extent possible, who fails to regularise their tax affairs. Those who do not resolve their position face potential penalties of up to 150 per cent for assets held in Israel (200 per cent for some other jurisdictions), naming and shaming on the HMRC website and either in-depth civil investigations or criminal prosecution leading to a custodial sentence.
Voluntary disclosure is the only sensible way forward for any taxpayer who has failed to properly disclose income or capital gains to HMRC, which has the power to investigate 20 years’ previous for income and capital gains taxes and indefinitely for inheritance tax.
WHAT IS VOLUNTARY DISCLOSURE AND WHY SHOULD I DO IT?
On September 5, 2016, HMRC opened its worldwide disclosure facility to allow taxpayers to voluntarily disclosure their tax irregularities relating to offshore assets. The benefits of a voluntary disclosure (provided it is complete) are much-reduced penalties, no naming and shaming and a much-reduced risk of criminal prosecution (HMRC has confirmed it will prosecute only where it needs to send a strong deterrent message, or where the conduct involved is such that only a criminal sanction is appropriate). HMRC has confirmed the beneficial terms of this deal will be reduced from September 30, 2018. From then on, further sanctions will be introduced.
In any event, if HMRC becomes aware of any irregularities from a third party before voluntary disclosure is made, then none of the beneficial terms is likely to apply. Any taxpayer who has concerns about their tax affairs should seek specialist legal advice as soon as possible about potential disclosure. Legal advice is given under legal privilege, which protects the taxpayer’s confidentiality.
Robert Levy is a specialist tax investigations expert for Kuits Solicitors, email@example.com, 44 0161 838 7867 Time to disclose is running out. Go figure