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Extra time before penalties?
No it’s not the World Cup, it’s HMRC’s latest guidance on the Requirement To Correct (RTC).
The Requirement to Correct was introduced in Finance (No 2) Act 2017 and required taxpayers to correct historic UK tax issues in respect of offshore income, assets and activities.
If they fail to act, they will face sanctions including punitive financial penalties.
Those penalties include:
Originally taxpayers were required to correct their position in respect of periods up to 5 April 2017 by 30 September 2018. This remains the legal position. However, HMRC’s latest guidance confirms that in three circumstances, RTC penalties will not be raised where the information is provided to HMRC by 29 December 2018 at the latest.
Those three circumstances are:
To recap, RTC covers individuals, partnerships, trustees and non-resident landlord companies with undeclared UK income tax, capital gains tax and inheritance tax liabilities arising from ‘offshore matters’.
The legislation defines offshore matters as:
There is no requirement to be a UK resident to have a relevant liability. Trustees of offshore trusts with ten-year anniversary inheritance tax charges and non-UK companies with rental income from UK property are also potentially impacted.
Taxpayers with current and previous offshore financial connections should review their positions as a matter of urgency, notwithstanding the extension in the deadline.
Their review should include;
Undertaking a comprehensive review of a taxpayer’s position may provide a defence if HMRC subsequently argues that there are historic liabilities that were not corrected.
Making a Disclosure
Disclosures can be made through the Worldwide Disclosure Facility, a facility opened on 5 September 2016. Registration for this is through HMRC’s Digital Disclosure Service portal.
If, however, omissions are identified that were deliberate, substantial and have occurred over a significant period, or in relation to a period that has previously been subject to investigation or disclosures made, then the Contractual Disclosure should be considered. While managing such disclosures, is more complex and onerous than the ‘streamlined’ Worldwide Disclosure Facility, the additional costs and complexity should be weighed against the risk of criminal investigation.
Learn more about the RTC and worldwide disclosure facility or offshore evasion and common reporting standards and check out our international tax and offshore trust services for more information on these important taxation matters.