Requirement to correct tax due on offshore assets
A new legal requirement is included in the Finance (No. 2) Act 2017 that creates an obligation for anyone who has undeclared UK tax liabilities that involve offshore matters or transfers to disclose the relevant information about this non-compliance to HMRC by 30 September 2018.
Failure to disclose the relevant information to HMRC on or before 30 September 2018 will result in the person becoming liable to a new penalty. The new failure to correct penalty is likely to be much higher than the existing penalties, with a minimum penalty of 100% of the tax involved.
To avoid becoming liable to these new higher penalties, a person must correct the position by no later than 30 September 2018. If they do this, the tax and interest will be collected, and the existing penalty rules will apply.
The purpose of the Requirement to Correct (RTC) legislation is to require those with undeclared offshore tax liabilities (relating to Income Tax, Capital Gains Tax or Inheritance Tax for the relevant periods) to disclose those to HMRC on or before 30 September 2018.
This will allow HMRC to take the appropriate action, for example, the collection of tax, interest and any penalties due under the appropriate legislation currently in force. This will ensure that those with offshore interests pay the correct amount of tax. Where taxpayers are unsure whether they have undeclared offshore tax, they will need to review their affairs to check whether action is needed.
30 September 2018 was chosen as the final date for corrections as this is the date by which more than 100 countries will exchange data on financial accounts under the Common Reporting Standard (CRS).
CRS data will significantly enhance HMRC’s ability to detect offshore non-compliance and it is in taxpayers’ interests to correct any non-compliance before that data is received.
If taxpayers are unsure whether they have undeclared UK tax liabilities that involve offshore matters or transfers, they should check their affairs and if necessary put things right before they become liable to the new FTC penalties that will come into force on 1 October 2018.
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