Worldwide Income & Capital Gains and the Requirement to Correct

Due to the Common Reporting Standard, HMRC now receives much more information regarding overseas accounts than it has received in the past. This access to information invariably has raised consequences of non-disclosure.

There is an opportunity to take remedial action before 30 September 2018 under what is known as the Requirement to Correct (RTC). This is a statutory obligation for individuals with overseas assets to correct historic issues relating to their taxation affairs before this deadline and applies to any person with a potential undeclared UK income tax, capital gains tax or inheritance tax liability.

Under the RTC, any taxpayers who need to disclose any income, gains or inheritance tax matters relating wholly or partly to an offshore issue that should have been subject to UK tax only have until 30 September 2018 to take the necessary steps to correct their tax position.

All taxpayers who have or who had any offshore financial connections including those who consider themselves to be non-UK domiciled and/ or non-UK resident should review their UK tax affairs to ensure that all Tax Returns submitted are correct.

If a taxpayer fails to correct their UK tax position before 30 September 2018, the ‘Failure to Correct’ (‘FTC’) regime will start with punitive penalties (unless the taxpayer has a reasonable excuse), including:

  • A tax geared penalty of between 100% and 200% of the tax not corrected (a 150% minimum for prompted disclosures)
  • For those who are aware of an issue during the RTC and who ‘Fail to Correct’, a 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
  • For those who were aware of an issue during the RTC period and who ‘Fail to Correct’, 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. 
  • HMRC may also investigate the taxpayer – either with a view to a prosecution or using its civil powers.

If you believe you may need to amend your tax records, contact us to ensure the appropriate action is taken before the 30th September deadline.