Overseas Assets: Requirement to Correct

The new penalty regime relating to UK residents holding undisclosed overseas sources of income and gains.

The key aspect is that any overseas income or gains which come to light after 30 September 2018 may incur a penalty of between 100 and 200% of the tax due plus 10% of the asset value.

Whilst you may still be able to appeal against the penalties levied, the grounds for doing so will be limited to situations where either HMRC has incorrectly levelled the penalty because the client has already disclosed the income, or where there is a “reasonable excuse”.  It will not normally be enough to say that you either left the matter in the hands of professionals, or you thought that your affairs were up to date.

Unlike other penalties, HMRC is no longer taking account of situations where there may have been innocent error. These new penalties will be charged under most circumstances unless it’s possible to convince HMRC or the First Tier Tribunal that there was a reasonable excuse which existed throughout the period of the failure.

The date of 30 September 2018 is not arbitrary since it coincides with the date on which the UK, as an early adopter of agreement, will have been receiving information for a complete year from over 100 countries under the Common Reporting Standard concerning assets held by UK resident individuals.

HMRC will presumably then have the information on which they can assess the new penalties after 30 September 2018 under normal enquiry rules or via discovery assessments.

The requirement to correct provisions cover:

  • Income tax, capital gains tax and inheritance tax;
  • offshore matters (broadly income, gains or assets outside the UK) and offshore transfers (transfers of UK income, gains or assets out of the UK); and
  • non-compliance – whether deliberate, careless or even an innocent mistake including incorrect returns, failure to submit returns and a failure to notify that a return should be issued.

Accordingly, we would strongly recommend that those individuals and trustees with offshore interests who have a UK tax liability sho;uld review their tax affairs to ensure that they are fully compliant.

There will still be tax, interest and penalties involved in making such a disclosure, but, whilst still significant, these will be minor compared to the level of penalty incurred after 30 September 2018.

If you require further information on this issue, please contact the Croner Taxwise Consultancy line on 0844 728 0120 or email consultancy@cronertaxwise.com

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Senior Tax Consultant
0844 728 0120

Neil is the Team Leader for the consultancy team, managing a multi-disciplinary team dealing with Full and Aspect CT and IT enquiries, all aspects of Employment Taxes enquiries including National Minimum wage and written technical consultancy as well as undertaking consultancy on his own portfolio of clients. Neil has worked in tax for 30 years, starting in Customs and Excise and transferring over to the Inland Revenue. He has also worked in various practices including Grant Thornton and PWC and currently specialises in technical enquiry work.