FINANCE
REQUIREMENT TO CORRECT – TIME IS RUNNING OUT
BY MARC FARMER , PARTNER AT WILKINS KENNEDY MAIDSTONE
TOUGHER PENALTIES ARE ABOUT TO KICK IN FOR ANYONE WITH UNDECLARED OFFSHORE TAX MATTERS , AS PART OF THE GOVERNMENT ’ S NEW REQUIREMENT TO CORRECT ( RTC ) LEGISLATION . RTC WILL APPLY TO ALL TAXPAYERS WHO HAVE OUTSTANDING OFFSHORE TAX NON-COMPLIANCE MATTERS AT 5TH APRIL 2017 . THOSE WHO ARE AFFECTED ARE URGED TO GET THEIR TAX AFFAIRS IN ORDER – BEFORE THE 30TH SEPTEMBER 2018 DEADLINE .
REQUIREMENT TO CORRECT
RTC was introduced in the last year ’ s Finance Act and is relevant to all individuals , trustees , partnerships and some non-resident companies who have undeclared offshore tax matters at 5th April 2017 . This will include a failure to notify HMRC of any income tax or capital gains tax liabilities , failure to submit an income tax , capital gains tax or inheritance tax return or submission of an incorrect return . The legislation also covers certain situations where UK income , assets or proceeds of sale are transferred overseas . This is of particular significance to non-UK residents with UK assets .
For the purposes of RTC , tax non-compliance includes any of the following :
• A failure to notify chargeability to income tax or capital gains tax .
• A failure to submit an income tax , capital gains tax or inheritance tax return .
• Submitting a return or certain other documents to HMRC in relation to income tax , capital gains tax or inheritance tax , which are inaccurate and include an understated tax liability , overstated loss or overstated claim .
Non-compliance is offshore if it relates to :
• Any monies arising from a source outside the UK .
• All assets located outside the UK .
• Activities carried on wholly or mainly outside the UK .
• Anything having effect as if it were income , assets or activities of a kind similar to the above .
DEADLINES
The legislation imposes a strict deadline for taxpayers to correct their tax affairs . Penalties will apply under RTC where a taxpayer had offshore tax non-compliance matters at 5th April 2017 and fails to correct them by 30th September 2018 . After that time , taxpayers are likely to face significant penalties .
PENALTIES
Penalties are charged at 200 % ( but can be reduced to 100 % if the taxpayer discloses the non-compliance and co-operates with HMRC ) on the shortfall of tax from the offshore non-compliance . No RTC penalty will be applied if there is a reasonable excuse or the taxpayer has relied on professional advice which is not disqualified . In certain circumstances , HMRC can also charge a separate , asset-based penalty and apply a “ name and shame ” policy for taxpayers who do not comply .
WHO WILL BE AFFECTED ?
Both UK and non-UK resident taxpayers will be affected by RTC . If you have outstanding offshore tax non-compliance matters as at 5th April 2017 , you will be required to correct this by no later than 30th September 2018 . After this time , the new penalty regime will apply .
If you think you may have offshore tax compliance matters which need correcting by 30th September 2018 , or if you would like a review of your offshore tax affairs and previous professional tax advice to ensure you are not at risk of the new penalties , contact Wilkins Kennedy ’ s offices in Ashford , Canterbury , Maidstone , Orpington and Sandwich .
Local offices :
Ashford : 01233 629 255 / Canterbury : 01227 454 861 Maidstone : 01622 690 666 / Orpington : 01689 827 505 Sandwich : 01304 249 997
enquiries @ wilkinskennedy . com www . wilkinskennedy . com
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