By Louise Somerset, Smith & Williamson private client and family office services partner
If you who owe tax in relation to offshore assets you need to act now or face a potentially severe fine.
Under the Requirement to Correct (RTC) legislation, taxpayers with outstanding offshore tax liabilities must come forward and ‘correct’ them before the end of this month.
The RTC applies to anyone with a potential undeclared UK income tax, capital gains tax and/or inheritance tax liability, for example individuals, partnerships, trustees or non-resident landlords, whether individuals or companies. 
HM Revenue & Customs (HMRC) says failure to comply will incur significant penalties if the omission is subsequently discovered, including:
- a tax geared penalty of between 100 per cent and 200 per cent of the tax not corrected
- a potential asset-based penalty of up to 10 per cent of the value of the relevant asset where the tax at stake is over £25,000 in any tax year
- potential “naming and shaming” where over £25,000 of tax per investigation is involved
- a potential additional penalty of 50 per cent of the amount of the standard penalty, if HMRC could show that assets or funds had been moved to attempt to avoid the RTC.
HMRC is not merely targeting tax evasion, but also ‘negligent and careless behaviour’.
It wants all taxpayers who have or had any offshore financial connections, including those who consider themselves to be non-UK domiciled and/or non-UK resident, to review their UK tax affairs to ensure that all tax returns are complete and correct.
Additionally, taxpayers should ensure they submitted tax returns for all years for which they owed tax on income or gains.
Requirement to Correct is a statutory obligation for taxpayers with overseas assets. They can make a disclosure through the worldwide disclosure facility (WDF) or through a bespoke disclosure to an office of HMRC, usually in the offshore co- ordination unit (OCU).
This disclosure allows any issues with their historic UK tax position to be corrected. The RTC period started on April 6 last year and ends on September 30 this year. Those who fail to act face punitive financial penalties and other severe penalties if any underpayment subsequently comes to HMRC’s notice, even if there is no deliberate intent behind their mistake and, in some circumstances, even if advice was taken at the time.
Many of those affected will be ‘non-doms’, but these are not necessarily high net worth individuals. In addition, RTC could apply to someone who has simply bought a property in Spain and has forgotten that the rent has been paid into an offshore account.”
There is still time for taxpayers and their advisers to act before the RTC deadline. There is still a window of opportunity for taxpayers and their advisers to review their position and ensure any mistakes or errors are corrected. Voluntary disclosures should always be made sooner rather than later.
The central message is that RTC may apply to anyone who may have undisclosed foreign income, gains or assets, and that they need to act fast and take advice.
