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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