You can­not win on penal­ties

The Jewish Chronicle - - FEATURES - BY ROBERT LEVY

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 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.


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,, 44 0161 838 7867 Time to dis­close is run­ning out. Go fig­ure

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