Taxpayers with undeclared offshore tax liabilities, including Income Tax, Capital Gains Tax or Inheritance Tax, are obligated to disclose these liabilities to HM Revenue & Customs (HMRC) on or before 30 September 2018 under HM Revenue & Customs’ Requirement to Correct (RTC) regime.
The same rules apply to taxpayers with undeclared UK tax liabilities that involve offshore matters or transfers.
Taxpayers who fail to disclose these liabilities to HMRC on or before this date will result in the person becoming liable for penalties that are likely to be much higher than the existing penalties, with a minimum penalty of 100 per cent of the tax owed.
Where tax is due as a result of non-compliance involving either an offshore matter or an offshore transfer, the unpaid tax is charged on or by reference to:
- income arising from a source in a territory outside the UK
- assets situated in a territory outside the UK
- activities carried on wholly or mainly in a territory outside the UK or
- anything having effect as if it were income, assets or activities of a kind described above.
This includes income or sale proceeds in the case of Inheritance Tax or any part of the income received or transferred abroad prior to 6 April 2017.
Taxpayers will be liable to the following, tougher Failure to Correct (FTC) penalties if the person fails to disclose this information before 30 September 2018.
There will be a standard penalty equal to 200 per cent of the tax liability due that was not disclosed to HMRC under the RTC.
Where the tax involved exceeds £25,000 in any tax year, and the taxpayer knew that they had relevant offshore non-compliance and didn’t correct it, the asset-based penalty at Schedule 22 to Finance Act 2016 will apply.
This is a penalty of up to 10 per cent of the value of assets connected to the failure to disclose. This is in addition to the standard penalty detailed above.
There is also an additional Offshore Asset Moves Penalty, which is equivalent to 50 per cent of the amount of the standard penalty and is charged in addition to the standard penalty.
This enhanced penalty provision applies to the RTC rule and will be equivalent to 50 per cent of the FTC penalty.
In more serious cases, if more than £25,000 of tax per investigation is involved and the individual knew that they had relevant offshore non-compliance and didn’t correct it, HMRC may share their name and details publicly, as part of its ‘naming and shaming’ policy.