Offshore tax evasion: HMRC closes the net!

Deadline to declare offshore tax liabilities approaches

HMRC have introduced a legal Requirement to Correct (RTC) undeclared UK tax liabilities on offshore matters or transfers by 30 September 2018. Ignore this and you could be potentially liable to penalties of up to 200% of the undeclared tax – double the normal limit. What’s more, the minimum penalty rate will be 100% of the undeclared tax and ‘offenders’ could be named and shamed by HMRC. For severe cases, there will be an asset-based penalty of up to 10% of the value of overseas assets.

There’s been a targeted campaign over the years to make sure people are declaring their offshore liabilities. This includes tougher penalties for tax advisers who promote offshore schemes and a requirement for financial advisers to send a special letter to their clients warning them that they could owe tax if they have any money or assets abroad. HMRC has also held a recent consultation to double the time limits they have to assess offshore tax matters.

Automatic Exchange of Information

Over 100 countries are now sharing tax information with each other via something called Automatic Exchange of Information. HMRC doesn’t need you to declare your overseas bank account any more – they’ll get this information direct from the overseas tax authorities and then check it against your tax information. If it doesn’t add up you can bet HMRC will be writing to you to ask why!

Most people are not deliberately evading UK tax – they have simply overlooked or didn’t know they had to declare their offshore income and gains to the UK tax authorities.

Action to take

You should review your overseas assets and check you’ve declared all your offshore income and gains to HMRC, or be confident otherwise that there is nothing to declare. For example, somebody who owns a holiday home in Spain isn’t suddenly going to be faced with higher penalties for not declaring that they didn’t receive any rental income from it. But if they sell that holiday home then they must tell HMRC (and in all likelihood the Spanish tax authorities too).

If you’ve checked your affairs and you’re still not sure whether you should have paid UK tax then it’s better to tell HMRC about them now, rather than wait for them to contact you. That way the tough new penalty regime won’t apply (although penalties may still be due under the current regime). Similarly, the tougher new penalties won’t apply if you seek an impartial opinion from a qualified professional, and you take their advice.

If you believe you do have something to declare to HMRC then don’t wait. You can call HMRC’s digital disclosure service on 0300 322 7012. Or for further advice, get in touch with a member of our tax team on 01903 234094.

A version of this blog originally appeared on the website of one of our MHA association member firms, Larking Gowen.