Offshore assets - Anything to declare?
Deadline of 30 September 2018 for “Requirement to Correct” (RTC) for undeclared UK tax liabilities on offshore assets as tough new penalties introduced.
You have until 30 September to get your offshore tax affairs in order with HMRC, following the introduction of new legislation, part of a package of measures brought forward by the government to tackle offshore tax evasion
“Requirement to Correct” (RTC) rules were revived in a second Finance Bill 2017 which created an obligation for taxpayers to notify the Revenue if money held offshore before 6 April 2017 has not been taxed or reported. Any outstanding liabilities relating to income tax, capital gains tax and inheritance tax, therefore, must be reported to HMRC by 30 September 2018.
The cut-off date is significant. The 30 September 2018 is also the day on which HMRC will receive Common Reporting Standard (CRS) data – accounts held by UK residents in around 100 countries will be exchanged automatically with HMRC. CRS is a way for countries to automatically exchange tax information in a process that has been developed by the Organisation for Economic Cooperation and Development (OECD). The UK signed up to be ‘Early Adopters’ of the CRS and so has already benefited from some shared information with overseas banks, insurers and wealth and asset managers but from the 30 September there will be a significant step up in terms of levels of exchange.
This automatic worldwide disclosure allows HMRC to identify and pursue those who have not come forward to regularise their affairs and any person who is found to have failed to have corrected their affairs will be subject to a new set of sanctions and some stringent penalties ranging from 100% to 200% on the tax owed.
You should already be aware of this impending development as professional advisers and financial institutions were tasked with the legal requirement to tell their clients by the end of August 2017 about the risks of holding undeclared offshore accounts. HMRC has also just published new online guidance setting out taxpayers’ responsibilities in respect of offshore income, assets and activities.
For most of you reading this article, there will be nothing to report as your tax affairs will already be in order. Remember this development is in response to recent scandals such as the “Paradise Papers” and the Government’s “zero tolerance approach” to tax evasion. It is about identifying and discouraging the small minority of tax payers who are looking for ways of not paying the correct amount of tax rather than the majority who are happy to comply with legislation and pay what is due.
For some of you, however, there may be concerns or even recognition that you had not considered offshore income and assets and this is an opportunity for you to set your records straight. If you are thinking of making a disclosure, you can make a correction by amending or submitting a tax return. The other way is to make a disclosure to HMRC through either the worldwide or contractual disclosure facilities. If you are in this situation, particularly if it was a result of ignorance rather than intent, seeking professional advice may be the way forward to ensure that you are back on track and set up for accurate reporting in the future.
There is no doubt that the Government will continue to crack down on the dishonest. HMRC is currently consulting on extending the existing time limit for tax investigations involving an offshore element to twelve years; at the moment it is four years, or six where a suspected underpayment has been brought about due to carelessness. The extended transparency of CRS will no doubt increase the number and the successful outcome of investigations. Although this crackdown is aimed at the dishonest, RTC also creates an opportunity for those of you who are unsure whether you have treated your offshore assets correctly, to review and if necessary to amend. But be warned – you only have until 30 September 2018.
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