This “Requirement to Correct” (RTC) measure was included in the second Finance Bill of 2017, which is currently awaiting royal assent, after being dropped from the first Finance Bill of the year when the snap election was called in May.
The RTC is expected to pass into law, and once it does taxpayers with undeclared UK tax liabilities relating to offshore interests will have until 30 September 2018 to correct their position.
Failure to do so could result in heavy penalties of up to 200% of the tax at stake. HM Revenue & Customs will also have the power to publicly name and shame affected taxpayers in certain circumstances.
Yvette Nunn, co-chair of the ATT’s technical steering group, says she would encourage all taxpayers with offshore interests to review their affairs as soon as possible.
“In the past, this has been achieved by HMRC offering the carrot of incentives for those who came forward and brought their tax affairs into order. The RTC represents a change in approach, threatening taxpayers with the stick of large penalties,” Nunn says.
Penalties under the proposed RTC range from a minimum of 100% to a maximum of 200% of the tax at stake and are payable on top of the actual tax liability.
A charity and professional body for people providing UK tax compliance services, the ATT “fully supports the government’s commitment to tackling offshore tax non-compliance”, Nunn says.
The non-compliant behaviours subject to the RTC are:
- Failure to notify chargeability to income tax or capital gains tax.
- Failure to make and deliver a return or other document for income tax, capital gains tax or inheritance tax.
- Delivering an inaccurate return or other document for income tax, capital gains tax and inheritance tax; where these relate to income, assets or activities located or transferred overseas.
Common reporting standard
The aim of the RTC is to encourage taxpayers to settle their affairs so the information can be used for the Common Reporting Standard (CRS), which came into affect for the first tranche of jurisdictions in September this year. A second group will join the global transparency initiative in 2018.
Under CRS, details of bank balances, interest, dividends and certain types of income earned by expats will be sent to their home governments wherever they may be.