UK Updates Requirement To Correct Guidance On Offshore Assets

; posted on
July 12th, 2018

The UK updated the Requirement to Correct (RTC) guidance to provide information about the new RTC legislation which relates to liabilities to Income Tax, Capital Gains Tax and Inheritance Tax.

Offshore Non-compliance Tackled by RTC Legislation

The RTC legislation, included at Section 67 and Schedule 18 of the Finance (No. 2) Act 2017, tackles offshore tax non-compliance involving offshore matters or transfers.

The tax non-compliance involves an offshore matter if the unpaid tax is charged on or by reference to:

  • Income arising from a source in a territory outside the UK
  • Assets situated in a territory outside the UK
  • Activities carried on wholly or mainly in a territory outside the UK or
  • Anything having effect as if it were income, assets or activities of a kind described above.

The tax non-compliance involves an offshore transfer if it is not an offshore matter, but the income (or sale proceeds in the case of a capital gain), or any part of the income, was either received abroad or was transferred abroad before 6 April 2017.

For inheritance tax, the tax non-compliance involves an offshore transfer if it is not an offshore matter, but the disposition that gives rise to the transfer of value involves a transfer of assets, and after that disposition, but on or before 5 April 2017, the assets, or any part of the assets, are transferred to a territory outside the UK.

A Higher FTC Penalty Introduced for Non-compliance

This new legal requirement creates an obligation to disclose the relevant information about those non-compliant to HMRC by 30 September 2018. Failure to disclose the relevant information on or before the time limits will result in the person becoming liable to a new, tougher failure to correct (FTC) penalty.

The standard FTC penalty is equivalent to 200% of the tax liability. It can be reduced by factors like the level of co-operation but with a minimum penalty of 100% of the tax involved. In the most serious cases, asset based penalty at Schedule 22 to Finance Act 2016 and offshore asset moves penalty at Schedule 21 to Finance Act 2015 will also apply.

Source: UK Government

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