Offshore Assets or Income ?... watch out for those ‘Pesky’ Penalties…

07 August 2019

Our previous blog Requirement to Correct – "Are you sitting Comfortably? went on to confirm that 30 September 2018 was the final deadline to take advantage of HMRC’s ‘amnesty’ to voluntarily disclose previously undeclared offshore income or gains. The advantage of doing so provided access to much reduced tax geared penalties.

The background to this arrangement was that HMRC now had access to unprecedented amounts of information from overseas jurisdictions, who have all agreed to exchange financial information to tackle worldwide tax evasion. This 30 September disclosure deadline, was effectively HMRC confirming this is the last chance to come forward, ie before they come and find you….

It comes as no surprise then, that if there was no attempt made to declare unreported overseas income or assets via the Worldwide Disclosure Facility “WDF” by 30 September 2018, HMRC have new powers to impose the tougher ‘Failure to Correct’ penalties. This will be an initial standard penalty of 200% of the tax due, for individuals and Trusts and Estates.

This penalty can be reduced to reflect factors such as the level of co-operation with HMRC to rectify matters, and the quality of the disclosure made, or as HMRC put it, “telling, helping, giving. The reduction would take account of whether a voluntary disclosure is made, but the reduction cannot reduce the penalty to less than 100% of the tax involved. Examples of the potential reductions are as follows:

  • Telling – HMRC give up to 30% of the maximum reduction
  • Helping – HMRC give up to 40% of the maximum reduction
  • Giving access to records HMRC give up to 30% of the maximum reduction

In addition to the standard penalty however, HMRC can also:

  • Charge an asset based penalty of up to 10% of asset value (if undisclosed tax exceeds £25,000).
  • Consider enhanced penalties of up to 300% of tax unpaid if HMRC can prove assets were moved in an attempt to avoid the RTC.
  • Publicly name and shame those who are considered to be particularly serious cases.

Penalties can also vary according to the location of the source country or territory. HMRC view each country according to 3 categories, with associated differences in potential penalties, and so inevitably overseas income sources from jurisdictions who refuse to exchange information, will face higher tax geared penalties.

It has never been so important to ensure that offshore assets and income are reported correctly. We have a dedicated team of International Tax experts here at Anderson Anderson & Brown LLP, who have the appropriate experience to be able to deal with any such disclosure or tax compliance requirements.  

To find out more about how we can help, please contact Lynn Gracie (lynn.gracie@aab.uk) or your usual AAB contact.

To find out more about Lynn and the private client tax team click here

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