Requirement to Correct
As most people are now aware, there is a consensus among worldwide tax authorities to gather and share information to minimise tax avoidance through utilising offshore interests. The aim is, of course, to ensure that all tax revenue is collected.... Read more
Blog21st Nov 2017
As most people are now aware, there is a consensus among worldwide tax authorities to gather and share information to minimise tax avoidance through utilising offshore interests. The aim is, of course, to ensure that all tax revenue is collected. The Common Reporting Standard (CRS) was introduced as a global standard for the automatic exchange of information and the UK now has reciprocal agreements with hundreds of other countries to share relevant tax information.
HM Revenue & Customs (HMRC) have already been acting on information received under the CRS process. Letters regarding offshore investments and assets have been issued to taxpayers requesting the completion and signing of wide ranging declarations on the accuracy of historical tax reporting, with the wording not limited to the offshore investments.
As we approach the first full automatic exchange of information between those countries, HMRC will begin imposing significant sanctions against individuals who have not previously declared such information, and have underpaid their UK taxes.
The Requirement to Correct (RTC) now imposes upon individuals, Trusts and Estates a requirement to submit a full disclosure to HMRC correcting any underpaid UK tax in respect of offshore interests by the 30th September 2018. Should they fail to do so by this deadline, the new tougher RTC sanctions will be imposed.
The potential sanctions are as follows:
- Tax geared penalties of between 100% – 200% of tax unpaid.
- Asset based penalty of up to 10% of asset value if undisclosed tax exceeds £25,000.
- Ability to publicly name those in the most serious cases.
- Enhanced penalties of up to 300% of tax unpaid if HMRC can prove assets were moved in an attempt to avoid RTC.
The sanctions also apply to genuine errors and mistakes. Under current regimes, there is a distinction between careless errors and deliberate ones, with the potential for a nil penalty for the former. However, the minimum charge will be 100% in RTC failure cases.
In view of all of the above measures, anyone who holds overseas assets or investments should undertake a review of their tax reporting as soon as possible, and well before September 2018. Professional advice is also essential before any declarations are signed, or any type of disclosure is made to HMRC.
For more information on the above matter, please do not hesitate to contact Stuart Petrie (firstname.lastname@example.org) or your usual AAB contact.