HMRC steps up crackdown on offshore evasion

Individuals have until next autumn to get their offshore tax affairs in order with HMRC, following the introduction of new legislation.

The 'requirement to correct' (RTC) past offshore tax liabilities was first announced by former chancellor George Osborne at Autumn Statement 2015, and then confirmed at Budget 2016.

Legislation was originally planned in Finance Bill 2017, although RTC rules were among the measures dropped after prime minister Theresa May decided to call a snap general election in June.

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 must be reported to HMRC by 30 September 2018.

Thereafter, the Revenue will have a wealth of information at its disposal after signing up to the global common reporting standards (CRS) initiative.

From 1 October 2018, tax authorities in more than 100 countries will begin exchanging data on financial accounts held around the world under the CRS.

HMRC will automatically receive information from all nations adopting the CRS, which will make it easier to identify discrepancies and flag taxpayers for investigation.

Outlining its stance during the August 2016 consultation, HMRC said:

"HMRC believes there remain many UK taxpayers who still have to put their offshore tax affairs in order.

"Increased media attention on offshore tax evasion has raised awareness of these issues and the risk of tax evasion being exposed is likely to drive tax evaders to consider putting their affairs in order.

"Many taxpayers with offshore compliance issues did not identify with 'evasion' even where they knew they were not paying the right UK tax. Others may not realise.

"The RTC is intended to motivate such taxpayers to act (including seeking advice where appropriate), and to help agents explain the consequences of non-compliance."

How to make corrections

If RTC applies to you, ensure you have sufficient information to submit to HMRC so it can assess the tax owed for the financial years in question.

You can make a correction by amending or submitting a tax return. The other way is to make a disclosure to the Revenue through either the worldwide or contractual disclosure facilities.

Penalties for non-compliance

If you fall within the scope of RTC rules, you have until 30 September 2018 to fully disclose any offshore tax affairs with the Revenue.

Thereafter, stringent new penalties ranging from 100% to 200% on the tax owed will be in place under HMRC's failure to correct (FTC) sanctions.

An additional asset-based penalty of up to 10% of the value of the asset in question would apply in cases where the tax involved exceeds £25,000 in any tax year, while FTC sanctions also include the potential to be publicly named and shamed.

There's also a separate offshore asset moves penalty of 50%, which applies where an asset has been deliberately moved to avoid the CRS.

Talk to us about your tax liabilities.