Time is running out for UK taxpayers who now have less than five working days to get their offshore tax affairs in order or face hefty penalties from HM Revenue & Customs.
UK residents who own assets offshore or earn part of their income abroad have until 30 September 2018 to declare any unpaid tax – otherwise they will face a minimum penalty of double the tax owed.
New legislation called the Requirement to Correct (RTC) will force UK taxpayers to tell HMRC about any offshore tax liabilities relating to UK income tax, capital gains tax, or inheritance tax.
Any individuals who have paid the incorrect amount of tax on overseas income in previous years must have corrected their tax returns by the deadline, or the potential fine will double to 200% of tax owed.
If the tax involved exceeds £25,000 in any tax year and the individual is found to have been aware that they were breaking the rules, they could also face a penalty of up to 10% of the value of assets.
HMRC has been issuing large numbers of warning letters both to taxpayers and their advisors. The effect, say some advisors, has been to induce panic and stress in their clients, given the hefty penalties that might incur.
The letters mention the penalties, but not the reasonable excuse route for mitigating these – for example, that the taxpayer was acting on advice from a qualified professional.
Renting out a property abroad, transferring income and assets from one country to another, or even renting out a UK property while living abroad are scenarios covered by the rules.
From 1 October, HMRC will have new powers to track down an UK taxpayer’s financial information in more than 100 countries. This will make it easier for them to detect any unpaid tax.