Overseas Income – HMRC’s new Requirement to Correct
Over the past few years, HMRC has offered beneficial terms to encourage people to declare their offshore income, and we currently have the Worldwide Disclosure Facility, which many people have successfully used to bring their tax affairs up to date.
This will all change with the new RTC legislation, which brings with it very large fines for irregularities in offshore tax affairs and comes into force from 1 October 2018.
Penalties will start at 200% of any undeclared tax liability on offshore issues. They can be reduced, but to no less than 100%. This is in addition to paying back the tax and interest owed. Those who fail to comply could be ‘named and shamed’ on HMRCs website.
Although in the past many people have been able to “hide” offshore assets and income from HMRC, due to the Common Reporting Standard now adopted by most countries, HMRC now have unprecedented access to information regarding UK residents’ offshore investments, which they did not have in the past.
The new RTC rules cover errors, oversights, and lack of ‘reasonable care’, as well as deliberate tax evasion, and they apply to individuals, trustees and companies.
Many people may be caught out unexpectedly if they declare offshore income but make an error or are deemed not to have not taken reasonable care.
They would be looking at potentially huge fines for failing to correct liabilities by 30th September 2018, unless they have a ‘reasonable excuse’ for not having done so.
If you feel you may fall into these categories, you should act immediately, by speaking to your tax advisor. You can still register to use the Worldwide Disclosure Facility until 30 September 2018, which will give you much more favourable terms for declaring all sources of previously undeclared offshore income.
Please do not wait until after 30 September 2018 before taking any action, as this delay could prove extremely costly!