Those affected by the requirement to correct rules have less than three weeks in which to notify HMRC that a correction will be made within the following 90 days (ie by 28 December 2018).
In February 2018 Rebecca Cave outlined requirement to correct (RTC), and what to tell clients. Since then there has been a substantial amount of coverage of RTC in the financial pages of the mainstream press and elsewhere.
At this stage of the game, the key point must be to review matters with anyone concerned to establish at a headline level, to establish whether there is any possible problem, and then ensure that the notification is in place before 30 September 2018.
Our experience is that HMRC is being a little slow to issue the necessary reference numbers to enable the actual disclosure to take place, so the waiting time can be used to find all the details needed and prepare the submission in draft for client approval.
When a disclosure is made it is critical that it is correct and complete, or that where information is not available, the thought process and explanation of assumptions and calculations is properly recorded in case of challenge.
Many people have received letters from HMRC which could be interpreted as a helpful reminder of the deadlines, if it were not for the fact that there is a threatening tone to them that in my view is decidedly not helpful.
I have spent way too much time in the last few weeks reassuring perfectly innocent taxpayers that they are not going to jail.
Some of the HMRC letters include a “certificate” to state that either a disclosure will be made or there is no correction necessary.
The precise authority for this certificate is unclear, and the stated date for the return of the certificate is 7 September 2018 (not a date given in the law). That date has now passed, so it will be interesting to see the consequences of simply ignoring the request for the certificate as some have done.
Is there something to declare?
The question boils down to the confidence one has in the reporting previously made. If there is any doubt at all, the prudent thing has to be to notify an intention to disclose and use the 90 days to clarify as much as possible.
Ultimately, where no disclosure is made, even if HMRC launch a tax enquiry (normally under TMA 1970 s 9A), if there is no undisclosed income there will be no RTC penalty in point.
HMRC has used the RTC rules as an opportunity to remind those who are presently under enquiry that if full information is not provided, and the enquiry process ends in tax payable, that tax will be subject to the enhanced penalties. I will leave others to debate the finer legal points but on a very practical level this is unhelpful and heavy handed from HMRC.
As a tax adviser, trying to assist clients through this process can be challenging. Clients are struggling to understand that inadvertent oversights, or getting caught up in the tangle of legislation in this area, can be penalised in the same way as deliberate non-compliance. It is hard to disagree that this seems unfair.
However, we are where we are, and advisers need to be alert to possible mistakes going forward. It will no longer be good enough to assume, for instance, that a client understands what is meant by “clean capital”, or that a bank has followed instructions.
It will be essential to check and verify at every stage as we can expect that HMRC will be looking for every opportunity to levy penalties.
About Lisa Spearman
Lisa is a Private Client Partner at Mercer & Hole, with over 30 years' experience in advising high net worth individuals. Her skill at tax planning, together with her knowledge of capital gains tax and inheritance tax matters, allows her to advise on a broad range of tax and trust issues.
Lisa is Chairman of the ICAEW Tax Faculty’s Private Client Committee and within that leads the working party on non domicile and residence matters. She is also a member of the ICAEW Tax Faculty Technical Committee.
Lisa joined Mercer & Hole as a Partner in 2003, and, prior to that she was a Director at Smith & Williamson.