Non-compliance means failure to notify, failure to deliver returns or other documents and the delivery of an inaccurate return or other document and applies to Income Tax, Inheritance Tax and Capital Gains Tax.
Taxpayers who do not correct on or before 30 September 2018 face draconian “Failure to Correct” (FTC) penalties. A typical ‘offshore’ case will currently attract a penalty of approximately 30% or 40%. In a standard FTC case, the FTC penalty will start at 200% of the offshore tax involved but can be reduced to reflect the quality of the disclosure, but not below a minimum of 100% of tax involved for an unprompted disclosure or 150% for a prompted disclosure. In serious cases, HMRC also has the power to charge a further 10% on top of the value of the asset or, where assets were moved, a further 50% of the standard FTC penalty.
HMRC also has the power to extend the current assessment time limits thus preventing years falling out of time in cases where people do not come forward. While there is no FTC penalty if a taxpayer has a reasonable excuse for not correcting, a reasonable excuse does not include relying on advice given by a person who:
- did not have appropriate expertise;
- failed to take account of all the taxpayer’s individual circumstances (so far as relevant to the matters to which the advice relates); or
- addressed it to, or gave it to, another person
For “avoidance arrangements” reliance on advice from an “interested person”, a person who participated in the relevant arrangement or facilitated the taxpayer entering it, is not a reasonable excuse.
The 30 September 2018 Requirement to Correct deadline has been chosen to match with the date HMRC will begin to receive the full Common Reporting Standard (CRS) information. Over 100 jurisdictions have agreed to automatically share information on financial accounts under the CRS. The first exchange of information took place in September 2017.
After 30 September 2018, HMRC will receive information about:
- overseas accounts
- insurance products
- other investments, including those held through overseas structures such as companies and trusts.
This includes details of the account holder or owner, including:
- date of birth
- balance of the account
- payments into the account
Buzzacott’s Head of Tax Investigations and Dispute Resolution, Mark Taylor gave his view on this case.
"The message is clear. You must correct any offshore non-compliance by 30 September 2018. To date, HMRC has collected £2.9billion in additional tax, interest and penalties from its international agreements and disclosure facilities and with further information to be shared under the CRS, HMRC will identify and challenge and FTC cases. The FTC assessment and penalty powers will see the £2.9billion collected figure rise substantially".
"If you receive income from a source in a territory outside the UK, hold assets in a territory outside the UK, carry on activities wholly or mainly in a territory outside the UK or have received or transferred abroad amounts before 6 April 2017, you should immediately seek advice from a specialist who can review your position and let you know where you stand".
For further information about the Requirement to Correct, please speak to your usual Buzzacott contact or Mark Taylor on 020 7556 1243. To leave an enquiry, please complete the form below: