Consultation - Tackling Offshore Tax Evasion: A Requirement To Correct

HMRC has issued a consultation on incentivising those with any UK tax irregularities in respect of offshore interests to correct those irregularities fully by 30 September 2018, after when, tougher sanctions will apply. The legislation will be introduced in Finance Bill 2017.

HMRC’s aim is to provide a strong incentive for taxpayers to review their offshore affairs and come forward to put them in order before HMRC receives the full Common Reporting Standards (CRS) data from other tax authorities in September 2018.

For income tax, capital gains tax and inheritance tax, the new requirement to correct (RTC) past offshore non-compliance will apply to any taxpayer who has an outstanding UK tax liability or obligation as at 5 April 2017 that relates wholly or in part to an offshore issue in one of three areas:

1. A tax loss relating to:
   1. income arising from a source in a territory outside the UK;
   2. assets situated or held in a territory outside the UK;
   3. activities carried on wholly or mainly in a territory outside the UK; or
   4. anything having effect as if it were income, assets or activities of a kind described above.

2. Where funds connected to a tax loss not within 1 above are received in a territory outside the UK or are transferred to a territory outside the UK.

3. Where funds connected to a tax loss not within 1 above are owned in a territory outside the UK.

The consultation text does not refer to residence in the UK. For example, it aims to cover non-resident trustees who may have UK tax liabilities.

To avoid delay causing the window for raising assessments to close, assessment time limits for earlier years will be measured at6 April 2017. The Government would prefer that any offshore non-compliance disclosed or identified by HMRC after the end of the RTC window (30 September 2018), is subject to failure to correct (FTC) penalties (see below). bThe consultation also covers the following areas:

• a one-off extension of 5 years to assessment periods following the end of the RTC  to allow HMRC the ability to raise assessments following a review the CRS data;

• a requirement for the taxpayer subject to RTC to provide information about any third party that has enabled or facilitated their offshore non-compliance;

• further information powers for HMRC to support the RTC or more widely the CRS;

• the new, tougher RTC sanctions would be charged in place of the sanction for the original offence; and

• a defence for reasonable excuse for non-compliance.

We have been expecting a new disclosure facility to replace the ones closed in December 2015. The consultation says: “HMRC... will launch a new, tougher Worldwide Disclosure Facility on 05 September2016.”

Responses to the consultation are due by 19 October 2016.

http://www.gov.uk/government/uploads/system/uploads/attachment_data/file/547778/Tackling_offshore_tax_evasion-a_requirement_to_correct.pdf