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Requirement to Correct - One year to disclose

Requirement to Correct - One year to disclose

HMRC’s crackdown on offshore tax evasion and non-compliance continues to intensify with the September publication of Finance Bill 2017.

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HMRC’s crackdown on offshore tax evasion and non-compliance continues to intensify with the September publication of Finance Bill 2017 and the introduction of a new legal obligation for those impacted to correct any issue in relation to their‘offshore matters’ that has given rise to a UK tax liability. This requirement is described as a ‘Requirement to Correct (RTC)’.

RTC requires any tax issue mainly or wholly relating to offshore matters for all periods up to 5 April 2016 to be corrected by 30 September 2018. Where tax liabilities that have not been corrected by this date, and are subsequently established, penalties for ‘Failure to Correct’ (FTC) will bite. It is the failure to correct which is penalised, not the original behaviour which led to the tax liability. Consequently FTC penalties could apply to those who are found to have tax liabilities which are duetocareless or deliberate behaviour, or even for those who took reasonable care.

Penalties will start at 200% of the tax liability (can be reduced but no lower than 100%). For the most serious cases an additional penalty of up to 10% of the value of the relevant asset will apply as well as the reputational damage of being ‘named and shamed’ on a public website. The only defence to FTC is that someone had a reasonable excuse why they did not correct before 30 September 2018.The provisions in the legislation specifically disqualifies tax advice received in certainsituations.

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