Offshore savers misled by advisers will dodge fines

Offshore investors who were wrongly advised and have "accidentally" avoided paying tax will not be hit by fines as part of a Government crackdown.

HMRC says individuals "misled" by financial professionals will not have to pay fines as part of the New Disclosure Opportunity, designed to claw back unpaid taxes by savers with money and assets offshore, the BBC reports.

The tax man will also not fine those who can point to a bereavement or serious illness as an "innocent error" in failing to settle their tax affairs with HMRC.

However, those simply ignorant of tax laws will still face a penalty, it warns.

HMRC has urged people with an offshore account who have not paid tax on incomes to rectify their tax bill or face the consequences.

Individuals who come forward before the NDO's deadline on 12 March 2010 will face a 10% fine on any unpaid tax.

"The new approach to penalties in the HMRC is that for truly genuine mistakes we do not levy penalties," Dave Hartnett, permanent secretary for tax at HMRC told BBC Radio 4's Money Box programme.

HMRC says one example of an "innocent error" is if a bank gives an incorrect calculation of the interest received from an account, which leads to a smaller amount of tax being paid than is calculated by the tax man.

An HMRC spokeswoman says fines will not be levied in cases affected by exceptional events beyond people's control, such as the death of a partner or relative at around the time the person should have told HMRC of the taxable activity.

Postal strikes or floods would also offer a "reasonable excuse", but work pressure, lack of information and ignorance of the basic law are not normally regarded as genuine excuses.

Under existing rules, people with a total amount of unpaid tax and duties under £1,000 avoid a fine. Yet, anyone who fails to come forward in the NDO faces at least 30% of unpaid tax and runs the risk of prosecution if they are later caught.

HMRC forced over 300 UK and foreign banks with operations in the UK to surrender details of UK taxpayers with offshore accounts, last month.

The taxman has also struck a deal to exchange details with the authorities in Liechtenstein, where an estimated 5,000 British investors are believes to have secret accounts.