Requirement to correct
This legislation puts down a deadline of 30 September 2018 to make a declaration of income tax, CGT or IHT liabilities involving an offshore matter or offshore transfer, which arose before 6 April 2017. The deadlines for assessing offshore-related tax for those periods have been extended to 5 April 2021, but how far back HMRC can go depends on whether the omission was deliberate, careless or was made with due care.
The correction can be made in a number of ways, such as by submitting or amending a tax return, informing HMRC of the need to pay tax, as part of an enquiry, or by using HMRC’s digital disclosure service.
Where the correction is made on or before 30 September 2018, and the tax is paid, the taxpayer will face the normal level of penalties. If the disclosure is made after that date the penalties can be up to 200% of the tax due, and in addition the taxpayer may be subject to the new asset-moves penalty and the asset-based penalty.
No penalty arises for failing to make a correction in time if the taxpayer has a reasonable excuse for the failure. A taxpayer who took advice (which is not disqualified advice), and followed that advice, will have a reasonable excuse for not making a correction as he believed he did not have a UK tax liability in relation to the offshore matter.
Advisers may have given disqualified advice if they didn’t have the appropriate expertise for giving it, failed to take account of the taxpayer’s relevant circumstances, didn’t give the advice directly to the taxpayer, or the advice related to tax avoidance arrangements.
If you have ever given advice related to offshore matters you may want to review your files and double check your professional indemnity policy.
Written by the Tax Advice Network