Undeclared offshore assets are firmly on the radar of H M Revenue and Customs (“HMRC”) in furtherance of the government’s continued crackdown on tax evasion and avoidance.
HMRC have recently launched the “Requirement to Correct” (“RTC”) regime to require UK taxpayers to notify HMRC, by 30 September 2018, of any “offshore non compliance”. Failure to disclose by this date will result in a new “failure to correct” penalty which could be as high as 200% of the tax involved. Criminal penalties could also be applied.
If the offshore non-compliance is not declared via the RTC, HMRC are very likely to become aware of it via the “Common Reporting Standard”, a global tax information exchange regime whereby HMRC will receive, by 30 September 2018, tax data on UK taxpayers from the tax authorities of over 100 offshore jurisdictions. It is in the taxpayer’s interest to come forward with the information voluntarily than risk HMRC finding out via this route.
“Offshore non-compliance” is defined widely and includes any undeclared or under-declared income tax, capital gains tax or inheritance tax on income, assets or activities outside the UK. HMRC have the power to look back an unlimited number of years in some circumstances.
- Any UK taxpayer or trustee who owns or holds offshore assets is potentially
affected. For example:
- a UK resident with an overseas rental property or offshore portfolio;
- an executor dealing with a UK domiciliary’s estate which includes offshore assets;
- a UK resident beneficiary who receives a distribution from an offshore trust which is paid into their offshore bank account; and
- a non-UK resident landlord who receives rental income from a UK property into their offshore bank account.
Anyone affected is advised to check that their UK tax affairs are up to date in respect of offshore assets, and to make a disclosure under the RTC before 30 September 2018 if necessary. If they are relying on there being no UK tax liability because of professional advice they have received, it could be worthwhile double-checking that advice in some circumstances. Reliance on professional advice will not always prevent a penalty being applied if HMRC disagree.
If you would like us to advise on your, or your trust’s or estate’s UK tax liabilities in respect of any offshore assets, or you would like more information on the RTC, please contact us.