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Deadline looms to disclose unpaid offshore tax

Taxpayers have only a few weeks left to disclose undeclared offshore tax liabilities to HMRC or risk a stiff penalty. The deadline is 30 September.

The Chartered Institute of Taxation (CIOT) is urging individuals who need to make a disclosure, or are unsure about making a disclosure, to act before the deadline.

The Requirement to Correct requires individuals with undeclared offshore tax liabilities relating to income tax, capital gains tax and inheritance tax to disclose them to HMRC on or before 30 September 2018.

HMRC  provides information and examples about who has a Requirement to Correct, when a correction must be made, which tax years are in scope and what the penalties are for non-compliance (https://www.gov.uk/guidance/requirement-to-correct-tax-due-on-offshore-assets). It also gives details of HMRC’s policy regarding penalties for taxpayers who notify HMRC that they have something to disclose either on or very near the 30 September 2018 deadline.

The penalties for failing to correct offshore non-compliance by 30 September 2018 are much higher than existing penalties, at a maximum 200% of the tax involved with a minimum penalty of 100% of the tax involved. They apply irrespective of the type of behaviour that led to the non-compliance.

Chris Davidson, Chair of Management of Taxes Sub-Committee at CIOT, said: “Tax rules relating to offshore matters can be complicated and anyone who is unsure if they have any undeclared offshore tax liabilities should check their position and, if necessary, take advice from a tax professional. Anyone who has taken advice in the past about an offshore matter should consider if they need to re-visit this advice and, if necessary, obtain a second opinion. Ultimately, it is the taxpayer’s responsibility to check whether they need to make a disclosure under the Requirement to Correct or not, and with the deadline approaching fast, time is running out to act.”

The 30 September 2018 deadline coincides with the date by which more than 100 countries will exchange data on financial accounts under the Common Reporting Standard (CRS).

Davidson added: “HMRC will soon be receiving a huge amount of information from other tax jurisdictions and we have been left in no doubt that they will use it to launch investigations and, in some cases, criminal prosecutions against individuals who have not made a correct and complete declaration of their offshore income and assets to the UK tax authority. The days of HMRC being ‘in the dark’ about UK taxpayers’ offshore bank accounts and other interests are over. This makes it all the more pressing that taxpayers check their positions now to ensure that they minimise their risk of receiving a penalty for failing to correct, or worse, put themselves at risk of a criminal prosecution.”

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