Requirement to Correct deadline 30 September 2018
There are now only a few days to go before the new offshore penalty regime will come into force for UK taxpayers with undeclared overseas income, capital gains and inheritance tax liabilities. A number of new sanctions will come into force, including 200% penalties, asset based penalties and the enhanced risk of being named and shamed by HMRC. Details can be found here.
It is essential that action is taken immediately to register persons (individuals, businesses and non-UK resident trusts) for the Worldwide Disclosure Facility (WDF) where it is believed that the person either owes tax or there is uncertainty over whether there is a tax liability. If the person is already under enquiry, then an outline disclosure should be made to the investigating officer by the 30 September deadline.
HMRC have issued guidance to help professionals and their clients to decide on the best course of action. If there is unpaid tax relating to overseas assets, it is imperative that the person is registered for the WDF now. Where there is any uncertainty as to whether the person’s tax affairs concerning their offshore assets are up to date it would be beneficial to register for the WDF, even though it might ultimately be decided there is no tax to pay. The reason being that the WDF will afford the individual a maximum of 90 days to consider their financial affairs, seek advice and report back to HMRC.
While there are provisions in the new legislation for individuals who have taken reasonable care to avoid the new penalty regime, HMRC have ‘raised the bar’ to make it more difficult for people to claim that they had taken all reasonable steps to ensure that there was no tax to pay.
Where individuals have an offshore element to their financial affairs or offshore assets, it is essential that they check their tax affairs are up to date and compliant with the RTC. If there is any doubt, as to whether their tax affairs are up to date, it may be beneficial to register for the WDF before 30 September.
The RTC deadline coincides with the automatic exchange of information timetable for cooperating OECD countries. Under the terms of the Common Reporting Standard, over 100 countries should have exchanged financial information on their customers. With the knowledge that HMRC will receive an unprecedented amount of information, careful consideration should be given as to whether to utilise the WDF now.
Finally, in cases where HMRC establish that the individual has evaded tax, HMRC also have to consider the new strict liability criminal offence for offshore tax evasion. While there are safeguards in place, individuals with overseas assets need to be aware that the landscape will change dramatically from 30 September and action should be taken now before it is too late.
If you believe there may be an offshore issue to be disclosed, it is important that you register your client for the WDF using HMRC’s Digital Disclosure Service by 30 September. We have a proven track record of making voluntary disclosures to HMRC and can assist with all areas of the disclosure and/or take over the disclosure process for you. If you have any questions please contact John Hood, Nathan Ross-Sercombe or Riocard Hoye on 0845 4900 509*.
* Calls from BT/standard local lines are charged at up to 5p per minute. Calls from mobile phones are charged at up to 50p per minute plus your phone company's access charge.