HMRC to launch a second 'Offshore Disclosure Facility' soon

HMRC's first Offshore Disclosure Facility (ODF - closed June 2007) offered UK individuals a partial amnesty to encourage disclosure of taxable income from previously unreported offshore bank accounts. This focused on customers of five major banks which had supplied information to HMRC following the issue of TMA 1970 s20(8A) notices. Rumours in late 2007 of a repeat performance came to nothing. However, it is now clear that HMRC does intend to launch a new ODF.

The 2007 ODF - which offered leniency on penalties - followed HMRC's receipt of customer information from five major UK high street banks in response to TMA 1970 s20(8A) notices issued in early 2007. The ODF raised around £400m but this figure fell well short of HMRC's expectations - probably in part due to inadequate publicity.

Based on the s20(8A) disclosures, HMRC is faced with the task of investigating up to 80,000 individuals. This process is being held back by a shortage of experienced investigators, and the type of information obtained from the banks is such that it cannot always be dealt with quickly. HMRC says that this was always acknowledged to be a major operation. As previously reported, HMRC is keen to start high-profile criminal prosecutions to show progress and provide a deterrent to others, but there has been no such prosecution so far. However there are strong rumours from reliable sources that we are within a few weeks of at least one high profile prosecution.

HMRC has opened enquiries into around 12,000 accounts and plans to deal with the rest over the next two years. HMRC sent letters earlier this year to a sample population of 5,000 individuals who might have been expected to disclose under the 2007 ODF, but the yield from that exercise was disappointing - a further £100,000 or so. HMRC had flagged these as low risk cases.

Based on strong information from the 2007 s20(8A) disclosures, HMRC now estimates that there are a further 70,000 to 100,000 individuals who potentially ought to come forward.

HMRC has said that it is now considering two possible approaches:

• A 'second and final' ODF, which would be widely publicised and, as a parallel exercise, the issue of s20(8A) notices to a much wider range of UK banks and financial institutions - perhaps a further 100 or so as suggested earlier this year; or
• as above but as the first of several more ODFs, to be launched as and when the further s20(8A) notices yield useful information.

The first alternative seems the more likely at present.