Britain’s so-called “requirement to correct” (RTC) legislation came into force yesterday, 30 September, and requires taxpayers to declare any foreign assets that could affect their UK income tax, capital gains tax or inheritance tax.
Investors who notified HMRC (Her Majesty’s Revenue and Customs) before the deadline were granted 90 days to disclose any offshore assets and pay the relevant tax due.
Australia, Switzerland and Singapore are among the countries that have signed up to let tax authorities share information internationally.
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.
Rachael Griffin, tax and financial planning expert at Quilter, said: “This is the latest in a series of government crackdowns on offshore tax evasion. Complacency will not be tolerated particularly as there are billions of pounds on the line.
“According to a report by HMRC released earlier this year there was a tax gap for the 2016-17 tax year of £33bn. Of that figure, £5.9bn was due to failing to take reasonable care, while £5.3bn is linked solely to tax evasion.”
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.
Whilst RTC rules are primarily targeted at a small minority who deliberately evade UK tax overseas, their scope is much broader. There is the risk that individuals have been making inadvertent mistakes, as they are oblivious to RTC rules, and they therefore suffer the most.
“Any one that thinks that they might be infringing the rules needs to urgently see a tax specialist to help avoid potentially being forced to pay up to 200% of the tax they owe,” Griffin added.