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Do you have overseas assets or income? Anything to declare?

New legislation called ‘Requirement to Correct’ requires UK taxpayers to notify HMRC about any offshore tax liabilities relating to UK income tax, capital gains tax, or inheritance tax and applies to non-compliance that took place prior to 6 April 2017.  It means that HMRC can go back to the tax year 2013/14, or 2011/12 if the failure to disclose is ‘careless’.  Where the loss of tax is due to ‘deliberate’ behaviour, HMRC may be able to go back further than this.

From 1 October 2018 more than 100 countries, including the UK, will be able to exchange data on financial accounts under the Common Reporting Standard (CRS).

CRS data will significantly enhance HMRC’s ability to detect offshore non-compliance and it is in a taxpayers’ interest to correct any non-compliance before that data is received.

The most common reasons for declaring offshore tax are in relation to foreign property, investment income and moving money into the UK from abroad.  However, some UK taxpayers may not realise they have a requirement to declare their overseas financial interests.

Under the rules, actions like renting out a property abroad, transferring income and assets from one country to another or even renting out a UK property when living abroad could mean taxpayers face a tax bill in the UK. Once a taxpayer has notified HMRC by 30 September of their intention to make a declaration, they will then have 90 days to make a full disclosure and pay any tax owed.

The standard penalty will be between 100% and 200% of the tax not corrected with the option for HMRC to levy more stringent penalties and ‘name and shame’ anyone where there is a need to open a tax investigation.  In the most serious cases, where the tax involved exceeds £25,000 in any tax year, and you knew you had relevant offshore non-income and didn’t correct it, the asset based penalty will apply.

This means a penalty of up to 10% of the value of assets connected to the failure will be charged. This is in addition to the standard penalty. HMRC is currently sending out letters to taxpayers where it has identified offshore sources of income through the Common Reporting Standard (CRS) exchanges of information with offshore jurisdictions.

This could lead to a future enquiry. In these cases, HMRC is encouraging recipients to seek a ‘health check’ of their affairs to ensure that their compliance is up to date and correct, or suitable disclosures are made.  We can assist with this health check if you have received such a letter.

If you feel that you may be affected by the Requirement to Correct, then please do not hesitate to contact Desirie Lea on 0151 348 8400 or email