Another term comes into the tax compliance space: "requirement to correct". UK taxpayers who have offshore tax affairs that don't fit the rules have until 30 September to sort these structures out, or face penalties.

UK taxpayers with foreign financial interests should act fast to ensure their affairs are in order before tough HM Revenue & Customs penalties come in from 30 September, an advisor warns. 

The UK has brought out a “Requirement to Correct” measure that means persons including trustees that have uncompliant offshore tax affairs, sometimes dating back decades, to remedy failings by 30 September this year. If measures aren’t taken a person could be hit with a 200 per cent tax penalty; a penalty worth 10 per cent of the value of the asset in question, and HMRC publishing names of non-compliant people. 

“This really is last chance saloon from HMRC’s perspective. The taxman has been steadily building its arsenal as it seeks to more effectively deal with offshore tax issues, and September 30 really is the hard cut-off point for individuals to get their affairs in order,” Gary Ashford, partner and Chartered Tax Adviser at Harbottle & Lewis, said in a note.

Under the RTC powers, a person can be deemed to be at fault even in the case of mistakes and when a person has taken advice. Subsequent criminal investigations cannot be ruled out, Ashford warned.
“There is a real risk that many could fall foul of the new rules completely innocently and, with the summer holidays just around the corner, time is in short supply,” he said. “The September 30 deadline has been chosen very deliberately by HMRC. From that date, HMRC will start to receive huge amounts of additional personal data as a result of the Common Reporting Standard. HMRC already has access to a large amount of data, but is basically saying that, from September 30, they will definitively know if the rules are being broken and there will be nowhere for the non-compliant to hide,” he continued. 

“Critically, HMRC will be naming and shaming the non-compliant, with the prospective reputational impact potentially causing even more damage than a fine. At the same time, while non-compliance is essentially a civil matter, the possibility of HMRC launching a criminal investigation should not be ruled out,” he said. 

“Making a disclosure now could result in any penalty potentially being reduced, and the avoidance of any reputational damage an HMRC investigation might cause,” he said. 

Ashford concluded: “While for the most part offshore issues are more likely to affect high net worth and non-domiciled individuals, anyone who has any foreign interests could potentially be snared by the new regulations - from the beneficiary of an inherited trust, to the owner of a foreign holiday home. There is huge potential for relatively low-level non-compliance. This is largely due to the impact of online banking, and globalisation more broadly, with many more people now having overseas financial interests.”

Some offshore structures, particularly trusts, are historic and are rarely reviewed on a regular basis. Structures created ten 10 or 20 years ago must be checked to ensure they remain legally solid, he said.