With the release of the Paradise Papers and
the Panama Papers prior to that, offshore tax avoidance and evasion has rarely
been out of the news.
Related to that, HMRC recently ran the
“Requirement to Correct” campaign which was targeted at people who had
undeclared offshore earnings or assets. For taxpayers who missed the September
30th 2018 deadline, they can expect HMRC to inflict severe and
substantial damage to their financial position and, in some cases, their
professional reputation.
There are still options available to you and
our team can assist. To arrange a free initial phone consultation, contact us here,
or call today on 0113 387 5670.
Requirement To Correct – Description
According to HMRC, Requirement to Correct
(RTC) affects “those with undeclared offshore tax liabilities (relating to
Income Tax, Capital Gains Tax or Inheritance Tax for the relevant periods) to
disclose those to HMRC on or before 30 September 2018.” RTC is concerned with
any non-compliance by an individual on their tax liability reporting and
payment up to and including 5th April 2017.
The campaign followed a request from HMRC to
over 100 countries worldwide on the financial affairs of British citizens. And
these overseas jurisdictions were very cooperative sending two huge dumps of
data back to the UK. The data provided was a major part of HMRC’s strategy to
find those who had not paid tax when they should have.
If you did disclose your undeclared
liabilities on or before 30 September 2018, you will be expected to find the
money to pay the tax due on them – insufficient funds will not amount to an
excuse. You will also have to pay interest on the amount owed.
If you failed to disclose your liabilities by
that date or those liabilities come to light in a future tax investigation
against you, you may face penalties of up to 300% of the undeclared tax plus
interest.
RTC’s dual focuses are on “offshore matters”
(income, capital gains, or assets you hold or have made outside the UK) and
offshore transfers (income or capital gains you’ve made in the UK that you’ve
subsequently transferred outside the UK).
The campaign specifically targeted taxpayers
who:
• failed to complete a return
• made errors in a return (whether you are
aware of those errors or not)
• not told HMRC that you should be issued with
a return for you to complete.
If you were not under investigation currently
by HMRC, you should have made your declaration under RTC on or before 30
September 2018. If HMRC were previously enquiring into your tax affairs, you
should have submitted all the related evidence and information on or before 30
September 2018 as part of their investigations.
However, there are options available to you to
bring your tax affairs up to date with HMRC. To discuss your options in confidence
with a member of our team, you can call us on 0113 387 5670, email us at enquiries@forthsonline.co.uk
or
fill out an Enquiry Form
and we will contact you directly.
Requirement To Correct – Carrot and Stick
The “carrot” with RTC was that, if you declared
your offshore liabilities within the RTC campaign timescale, the consequences would
“restricted” to paying HMRC what you owe in full together plus interest charges
and that you might be excused additional penalty fines.
However, let us caveat that by saying that HMRC
aren’t in a forgiving mood (the Loan Charge is a good example of this) at the
moment so we personally would not put much faith in the recent statement they
have given that a reasonable excuse for non-compliance with the RTC deadline
may result in a fine being reduced to zero.
If you missed the deadline, you’re almost
certainly guaranteed to be given a 100% fine, essentially meaning that you’ll
pay the tax you should have paid twice over.
The fine may rise to 200% depending on HMRC’s
assessment of your behaviour and cooperation during their investigation into
your non-compliance.
A 300% fine may be applied if HMRC believe
that you have moved assets in a deliberate attempt to conceal liabilities from
them.
If the tax you owed was more than £25,000,
HMRC may levy an additional 10% asset penalty.
As if these fines were not serious enough,
again depending on your behaviour and cooperation in an investigation if you
don’t comply with the RTC deadline, HRMC may name and shame you.
Requirement To Correct – Second Home Abroad?
If you’re renting your overseas property out
or you have sold it recently, you should get in touch with your accountant
without delay. There may be both income tax and capital gains tax issues you
have to deal with in both countries.
If your overseas home is something you’re not
making any money from and you have a bank account in the country in which your
home is situated which is tied to the property, you should have nothing to
worry about.
Requirement To Correct – Mitigating
Penalties
According to Taxation
magazine, there are a number of ways in which someone who missed the RTC
deadline could bring down the level of the interest and fines they pay other
than voluntary compliance (albeit after the deadline). Labelled “telling,
helping, and giving”, taxpayers may receive leniency if they:
• tell
HMRC that you agree something is wrong and why it happened
• tell
HMRC about the extent of what went wrong
• tell
and help
HMRC by answering their questions in full
• help
HMRC to understand your accounts and to answer letters quickly
• help
HMRC by being available for meeting
• help
HMRC by checking your own records to identify and understand how inaccurate
your accounts were when reported
• give
HRMC records without delay
• give
HMRC access to records they might not know about
It will be possible to appeal against any
fines given under an RTC ruling at the First Tier Tribunal. The minimum penalty
of 100% however so any appeal will not bring the amount of the penalty beneath
that level.
You are also unlikely to be able to appeal
that someone else give you the advice is they were an “interested party” – that
is someone who would benefit from your participation in a tax avoidance scheme.
Likewise, if you received advice from someone who does not have “sufficient
experience”, the chances of this being considered as a “reasonable excuse” are
low.
Our team of experienced tax investigations and
disclosures professionals assist individuals in dealing with HMRC when they
have unpaid tax liabilities.
To arrange a free initial phone consultation
to discuss your tax affairs in confidence, call us on 0113 387 5670, email us
at enquiries@forthsonline.co.uk
or fill out an Enquiry Form and we will contact you directly.
