HMRC is focusing on uncovering the large portion of unpaid taxes that relate to offshore assets. Large penalties are to be introduced and the Requirement to Correct (RTC) cut-off is looming.
Aimed at those with undeclared offshore tax liabilities, the Requirement to Collect affects anyone who has not paid the relevant taxes relating to offshore interests and makes it essential that outstanding matters are corrected before the deadline of 30 September 2018. 30 September is also the closing date for more than 100 countries to exchange data on financial accounts under the Common Reporting Standard (CRS). Once HMRC has received this data, it will be actively looking for any past under-declared or undisclosed tax liabilities. If tax is found to be due, a ‘Failure to Correct’ (FTC) penalty will be applied.
Aimed at deliberate offshore tax evasion and attempts to conceal such evasion from HMRC, the standard penalty rate is set at 200% with some scope to reduce it to a minimum of 100% of the tax due, depending on the severity of individual circumstances. The FTC will apply to any tax omission that occurs before 6 April 2017 and Income Tax, Capital Gains Tax and Inheritance Tax that involves offshore matters are all targets for investigation.
In addition, HMRC may apply additional sanctions on a case-by-case basis. An Asset Based Penalty will be applied for an additional 10% of the asset value should the tax owed exceed £25,000; and where assets have been deliberately moved to avoid tax obligations, the Offshore Assets Moves Penalty, equivalent to an additional 50% of the standard penalty, will be applied. In these cases the HMRC may also publish an individual’s details in line with the legislation for Publishing Details of Deliberate Tax Defaulters.
In certain limited circumstances, the time limits for corrections have been extended and all amends may be made via HMRC’s digital disclosure facility, or by telling an officer of HMRC in the course of an enquiry.
Taxpayers now have only a short window to find and rectify any omissions before the deadline and HMRC is advising that a lack of knowledge or understanding of the tax system, or of the new measures, will not qualify for a pardon. Its message is that clients should urgently have their offshore tax status reviewed by an independent tax advisor as soon as possible.
For more information or help in reviewing offshore obligations, call Everfair Tax’s experienced team who will be happy to assist.