There is nothing wrong with having investments overseas as long as you declare all taxable income and gains on your UK tax return.
The government is getting tougher in its approach to tackling those who don’t declare the correct amounts of tax due on their offshore income and assets. There have been a number of offshore disclosure opportunities in the past, however, this seems to be coming to an end with the new legislation. There is still a chance to bring all your tax affairs up to date if you have worldwide income that’s not been taxed before.
Overview
Requirement to Correct (RTC) is a new legislation requiring those with undeclared offshore tax liabilities (Income Tax, Capital Gains Tax or Inheritance Tax) to disclose those to HMRC on or before 30 September 2018. Failure to comply will result in:
- penalties of up to 200% of the tax due, with an absolute minimum of 100%
- Potential asset-based penalty of up to 10% of the value of the relevant asset where the tax at stake is over £25,000 in any tax year
- Potential “naming and shaming” where over £25,000 of tax per investigation is involved
- A potential additional penalty of 50% of the amount of the standard penalty, if HMRC could show that assets or funds had been moved to attempt to avoid the RTC
- The RTC apply to any tax error arising from offshore financial interests – it is not limited to those who have deliberately failed to pay the right amount of tax. The regime applies to anyone who has UK tax liabilities, which would include non-UK resident trustees and non-resident landlords.
What if an error is discovered?
If an error is discovered, it should be disclosed to HMRC. There is no prescribed route for disclosures under the RTC regime and the method of disclosure will depend on the circumstances in each case.
Action required
- Anyone with offshore interests should review their affairs to ensure they have been and will continue to be fully tax compliant.
- Where errors are identified, a disclosure should be made to HMRC as soon as possible.
If you believe the RTC will impact you or would like an impartial second opinion, please contact us.
By Fozia Muddassir