Q I have an offshore bank account and have been receiving interest on this account for a number of years. This interest has never been declared to the UK tax authorities and I would like to know if I should have reported this and, if so, what I should do now? GO’C, Derry

Alan Curry answers: If you are resident and domiciled in the United Kingdom you must declare worldwide income to HM Revenue & Customs (HMRC) and it is likely that you will be liable to pay tax on the interest you receive from offshore bank accounts.

In recent years, some EU countries and other offshore jurisdictions, such as Isle of Man or Jersey, now apply a ‘withholding tax’ of 20% which is automatically deducted at source.

If there is withholding tax deducted from your interest, you are still required to declare the income to HMRC, but a credit will be applied for the withholding tax withheld. If you are a higher rate taxpayer (ie subject to tax at 40%) you will have to pay an additional 20% tax to HMRC.

In the April 2009 Budget, HMRC announced that a New Disclosure Opportunity will be launched in Autumn 2009. This will allow individuals to disclose any unpaid tax which may be due as a result of interest received from offshore bank accounts. The scheme is to remain open until March 2010.

The terms of this disclosure have not yet been released, but individuals who make the disclosure will be required to pay any outstanding tax together with interest and a penalty. The amount of the penalty has yet to be determined.

There was a similar offshore disclosure facility offered in 2007 and I know from experience of making claims during this period that it can be a time consuming exercise to obtain the relevant bank statements and collate this information into a disclosure to HMRC.

With this in mind, I recommend that if you need to avail of the New Disclosure Opportunity, you should start to gather this information as soon as possible and seek professional tax advice to assist you with making the disclosure. Under no circumstances should you neglect to advise HMRC of income you receive from outside the UK.

Send your questions to: personalfinance@belfasttelegraph.co.uk. We will answer as many queries as possible but regret we cannot enter into individual correspondence.

Keith Storey is a Director in ASM Horwath. He is experienced in providing advice to both private and corporate clients. His areas of expertise include pre and post retirement planning, developing individual investment strategies, inheritance tax planning, and life and illness protection plans. ASM Horwath, 20 Rosemary Street, Belfast BT1 1QD (NI 37083) is a company registered in Northern Ireland and is authorised and regulated by the Financial Services Authority, FSA registered number 193758.

Alan Curry is Director of Tax at ASM Horwath. He is a member of both the Institute of Chartered Accountants in Ireland and the Chartered Institute of Tax and his areas of expertise include tax compliance & planning, employment & personal tax, VAT, trusts & estates, retirement planning, inheritance tax, divorce & separation, and capital taxes planning.

Alan and Keith can be contacted at tel: 028 9024 9222.

--

DISCLAIMER

Every reasonable care is taken to ensure that the information appearing on the Personal Finance Forum is accurate and up-to-date. However, the user should not take the accuracy of the material for granted, nor rely upon it as a statement or representation of fact upon which to take (or refrain from taking) any decision or action. The information is not intended to promote any specific product, nor should you use it as the basis of any action until you have discussed matters with your financial professional. Materials are directed solely at those who access this web site from the United Kingdom mainland.