In an earlier article, posted on 1 December 2017, we provided details of the Requirement To Correct (RTC) legislation in relation to non-disclosure of offshore income and gains. The deadline set out in this legislation, 30 September 2018, is approaching fast. After that date, the Failure To Correct (FTC) regime will start, with HMRC applying extensive penalties where unpaid tax liabilities are discovered, including:-
- A standard tax-geared penalty between 100% and 200% of the liability.
- An asset based penalty of up to 10% of the value of the relevant asset where the annual tax at stake is in excess of £25,000.
- Similarly, where tax is in excess of £25,000, a potential “naming and shaming” of the individual.
- Where HMRC can prove assets or funds have been moved in an attempt to avoid the RTC, an additional penalty of 50% of the standard penalty could be imposed.
Historically, we have seen many amnesties and initiatives by HMRC to encourage disclosure of offshore tax matters. However, the FTC legislation is one of the most aggressive forms of legislation introduced by HMRC to target those with any form of offshore tax irregularity, regardless of how they may have arisen.
What is Offshore Non-Compliance?
With the increasing complexity of tax legislation, and the requirement to correct relating to “relevant offshore tax non-compliance”, a term that is very broadly defined, it is imperative that where there is any concern of historical non-compliance, the final window of opportunity in advance of 30 September is not missed. As well as covering under-declared tax linked to offshore matters, it also includes circumstances where tax arose on UK based transactions where the income, proceeds, or assets have been received or transferred abroad
Who is at Risk?
When considering the likelihood of HMRC identifying non-compliance, however small, it should be borne in mind that over 100 countries have exchanged financial information over the past year, largely electronically. Furthermore, it is not only those resident in the UK that may need to consider their position, as the rules cover all aspects of income, capital gains and inheritance tax, including those for trustees, partnerships and non-resident landlords.
If on reflection you have any concerns, or if you are unsure whether you have undeclared UK tax liabilities that involve offshore issues, please get in touch with your usual Saffron contact who will be happy to discuss the matter with you.