Blogs/Vlogs

Overseas, under scrutiny

12 June 2018

'Offshore' and 'Overseas' have become dirty words in tax over the last few years. Partly because of genuine tax evasion coming to light through whistle blowers and data leaks but also because of a kind of trial by media where any foreign financial connection is viewed with deep cynicism.

For the last 20 months or so HMRC have been offering taxpayers a 'Worldwide Disclosure Facility'. A last chance for those with offshore related tax liabilities to come clean before HMRC send in the heavies.

And when HMRC do so, they’ll be armed with two important weapons;

First is the Common Reporting Standard (CRS) – a system of automatic data exchange between a vast number of subscriber countries (including many viewed as tax havens) which means that without any action on their own part HMRC will receive details of the overseas finances of UK taxpayers.

CRS has already been in some form of operation for the last year or so, and full scale exchange has now almost come to fruition.

Second is the Requirement to Correct (RTC) regime. This regime compels taxpayers to consider their historic tax reporting in the context of offshore matters and to come forward to HMRC to report any under-declared taxes.

30 September 2018

This is a watershed date. It is both the end of the period of grace within which taxpayers can make a disclosure of historic liabilities to HMRC and the last day before the RTC penalty regime applies.

RTC penalties begin at 200% the underpaid tax and cannot be mitigated to below 100% the tax. In addition there is scope for a 50% secondary penalty where attempts to conceal the tax loss are demonstrated, or an up to 10% asset value based penalty for the most serious cases.

There are also, of course, the already existent risks of a criminal prosecution for those cases serious enough to constitute fraudulent evasion of tax.

What should I do?

As we approach the closing stages of this two year regime, time is very much running out. Ignorance will be neither bliss nor a reasonable excuse which spares anyone caught after 1 October 2018 from the new punitive rules. And there can be little hope of continuing to slip under HMRC’s radar once CRS is in full swing and once HMRC begin working through the hit list which it puts on a plate for them.

If you think you have any historic tax liabilities relating to overseas assets then now is the time to act. You should seek expert professional advice as a matter of urgency and consider the best route to a disclosure with HMRC for your circumstances.

For more information, please contact me or your local UHY adviser. To read more of our latest tax blogs click here.

Let's talk! Send an enquiry to your local UHY expert.