Requirement to Correct
It is just over a month away, before the ability for individuals to notify HMRC of any non-compliance issues relating to offshore matters closes on 30th September 2018. Historically this process has offered lower penalties than if HMRC had discovered the error themselves.
As of 1st October 2018, the new ‘Requirement to Correct’ (RTC) legislation takes effect, and the option for voluntary disclosure is removed. Any non-compliance discovered by HMRC after this date will be liable to the new ‘Failure to Correct’ (FTC) penalty regime, where penalties could be up to 200%.
This date also coincides with the start date for the common reporting standard, when the tax authorities in more than 100 countries will begin exchanging data on financial accounts, including details of bank interest, account balances and proceeds from the sale of financial assets.
HMRC are currently in the process of issuing a reminder of this change to certain UK taxpayers, urging them to declare any previously undisclosed foreign income or profits on offshore assets before 30th September to avoid these higher tax penalties. This includes income from letting a property abroad, transferring income and assets from one country to another, or renting a UK property when living abroad.
Below is a summary of the main criteria regarding Requirement to Correct:
- Requirement to Correct creates a new legal requirement for anyone who has undeclared UK tax liabilities involving offshore matters or transfers
- The legislation relates to non-compliance of Income Tax, Capital Gains Tax or Inheritance Tax
- They are required to disclose details of any non-compliance to HMRC by 30 September 2018
- Otherwise, they will be liable to the new Failure to Correct (FTC) penalty
- The standard Failure to Correct penalty is 200% (this may be reduced, depending on the quality of the disclosure, but only to a minimum of 100%)
The taxation of overseas matters can be complex. Should you receive such a reminder, or have any concerns regarding potentially undisclosed overseas income or gains please contact us in order that we can assess whether any action is required before the deadline to prevent significantly higher penalties.