HMRC’s requirement to correct

The new requirement to correct (RTC) legislation was introduced by the Finance (No.2) Act 2017. The legislation created a new statutory obligation for taxpayers with undeclared UK tax liabilities that involve offshore matters to disclose any relevant information to HMRC by 30 September 2018.

The RTC applies to any person with undeclared UK income tax, capital gains tax and/or inheritance tax liability concerning offshore matters or transfers. The RTC legislation relates to offshore tax non-compliance committed before 6 April 2017.

The final date (30 September 2018) for correcting historic offshore tax positions coincides with the date more than 100 countries will exchange data on financial accounts under the Common Reporting Standard (CRS). This data will significantly enhance HMRC’s ability to detect offshore non-compliance and it is in taxpayers’ interests to correct any non-compliance before that data is received.

Once the deadline ends, any new disclosure will be subject to the new failure to correct (FTC) penalties which are more punitive than the existing RTC penalties together with the possibility of taxpayers being publicly named and shamed. The FTC standard penalty will start at 200% of any tax liability not disclosed under the RTC and cannot be reduced to less than 100% even with mitigation.

Planning alert

Any taxpayers that are unsure as to whether or not they need to make a disclosure are strongly encouraged to check their tax position. The RTC rules are very complex and we can help review any historic issues and advise and assist with making any necessary disclosures to HMRC. A disclosure can be made using the Worldwide Disclosure Facility or possibly using alternative disclosure methods which may be more suitable.

Posted in Overseas tax issues

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