HMRC has issued updated guidance to the requirement to correct (RTC) rules for offshore liabilities and non-compliance, with the 30 September deadline rapidly approaching.
Offshore financial centres and tax avoidance are a perennial topic in the news, and there has been a shift in wider public perception following the revelations in the Panama and Paradise Papers. The RTC rules are designed to allow people to disclose their undeclared offshore tax liabilities – for income tax, capital gains tax or inheritance tax – to HMRC, as part of their efforts to combat tax evasion.
HMRC will investigate any disclosures and take appropriate action, which will include collecting any payments due, as tax, interest or penalties.
While it may not seem tempting to put yourself forward for a potentially expensive assessment such as this, HMRC has confirmed the sanctions for those who fail to correct. The standard penalty for non-disclosure under the RTC is set at a hefty 200% of the tax liability.
It will be possible to reduce this penalty by voluntary disclosure, providing access to records and helping HMRC with its investigation. However, the penalty can only be reduced to a minimum of 100% of the tax liability, and to do that an individual must provide information about anyone who encouraged, assisted or facilitated the non-compliance.
Disclosures made by midnight on 30 September 2018 will avoid the penalties, provided they are made using the Worldwide Disclosure Facility, submitting a return amending inaccuracies or by telling an HMRC officer during an enquiry. And the disclosure process then needs to be fully completed within 90 days.
With such harsh penalties being introduced, and a culture of whistleblowing to be encouraged, the incentive is there to get any disclosure in ahead of the deadline.