HMRC raise the stakes on offshore non-compliance | KPMG | GI

HMRC raise the stakes on offshore non-compliance and launch Worldwide Disclosure Facility

HMRC raise the stakes on offshore non-compliance

UK taxpayers with offshore holdings could soon be subject to new legal obligations, with significant sanctions if they fail to comply.

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UK taxpayers with offshore holdings could soon be subject to new
legal obligations, with significant sanctions if they fail to comply. HMRC has
also launched the ‘Worldwide Disclosure Facility’ to enable taxpayers to
correct past irregularities in advance of the new sanctions being introduced.

The headlines are:

  • HMRC announced a new consultation at the end of August which proposes a ‘Requirement to Correct’ (RTC).
  • Any person with UK tax irregularities related to offshore interests has a legal obligation to correct this and settle those liabilities with HMRC.
  • It is envisaged that the RTC will encourage taxpayers to review their affairs and take advice as appropriate to assure themselves that their offshore interests are tax compliant and if not to correct this.
  • The correction must be made on or before 30 September 2018.
  • By 30 September 2018 HMRC will be receiving ‘Common Reporting Standard’ (CRS) data (from circa 100 countries) which will allow it to identify and pursue those who have not come forward to regularise their affairs.
  • Any person who is found to have failed to have corrected their affairs will be subject to a new set of sanctions.
  • Under one proposal this would include penalties in the range of a minimum of 100% up to 200%, and in addition a 10% asset based penalty and “naming and shaming” of those who failed to correct.
  • HMRC has also announced a new Worldwide Disclosure Facility (WDF). This was launched on 5 September 2016.
  • The WDF requires the disclosure of UK tax liabilities that relate wholly or partly to an offshore issue and requires:
    • a notification to disclose;
    • completion of the disclosure within 90 days of date the notification is confirmed; and
    • payment of tax, interest and penalties by the disclosure submission date
  • The WDF provides no immunity from prosecution.

It is important this is not seen as simply an issue for those who have evaded tax as the RTC impacts anyone with tax liabilities due in respect of overseas aspects to their affairs who have failed to correct (including offshore trustees). As a result, in advance of receiving significant amounts of data at the end of September 2018 (or September 2017 from “early adopter” countries such as the Isle of Man) through CRS, HMRC have made it clear they expect taxpayers to review their affairs and take advice as appropriate to assure themselves their offshore interests are tax complaint.

Notwithstanding the above, the WDF is not the only way to make a disclosure to HMRC and each case should therefore be considered on its merits. We have extensive experience advising those with a requirement to disclose issues to HMRC.

The above is only a brief summary and not intended as taxation advice. For further information and/or taxation advice please contact one of our experts.

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