Opinion Former Article

Warning to disclose unpaid offshore tax or face severe penalties

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

The Requirement to Correct1 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’s guidance2 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. 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 per cent of the tax involved with a minimum penalty of 100 per cent of the tax involved. They apply irrespective of the type of behaviour that led to the non-compliance.

Chris Davidson, Chair of CIOT’s Management of Taxes Sub-Committee, 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).

Chris Davidson said:

“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.”

Notes for editors:

1. For the legislation on Requirement to Correct Certain Offshore Tax Non-Compliance, see Schedule 18 Finance (No 2) Act 2017.

2 HMRC’s Guidance is on GOV.UK and can be found here.

3. The CIOT held a webinar recently which can be accessed here: .The CIOT has also published Q&As which can be found here.

4. The Chartered Institute of Taxation (CIOT)

The CIOT is the leading professional body in the United Kingdom concerned solely with taxation. The CIOT is an educational charity, promoting education and study of the administration and practice of taxation. One of our key aims is to work for a better, more efficient, tax system for all affected by it – taxpayers, their advisers and the authorities. The CIOT’s work covers all aspects of taxation, including direct and indirect taxes and duties. Through our Low Incomes Tax Reform Group (LITRG), the CIOT has a particular focus on improving the tax system, including tax credits and benefits, for the unrepresented taxpayer.

The CIOT draws on our members’ experience in private practice, commerce and industry, government and academia to improve tax administration and propose and explain how tax policy objectives can most effectively be achieved. We also link to, and draw on, similar leading professional tax bodies in other countries. The CIOT’s comments and recommendations on tax issues are made in line with our charitable objectives: we are politically neutral in our work.

The CIOT’s 18,000 members have the practising title of ‘Chartered Tax Adviser’ and the designatory letters ‘CTA’, to represent the leading tax qualification.
Contact:  Hamant Verma, External Relations Officer, 0207 340 2702 HVerma@ciot.org.uk
(Out of hours contact: George Crozier, 07740 477 374)
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