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Offshore Compliance

Do you have overseas income or assets?

HMRC has increased resources to tackle offshore non-compliance. This article will mention some of the recent developments and methods on which taxpayers can disclose foreign income which may not have been properly communicated previously. It will also comment on the issues which can arise once the HMRC receives information from overseas.

Common Reporting Standard

The CRS is an information standard for the automatic exchange of tax and financial information on a global level. It was developed by the OECD to combat tax evasion and was, in great part, based on the USA FATCA.

Around 100 countries have signed and are committed to supplying data to HMRC. Early adopters started to report from June 2017:

Anguilla, Argentina, Barbados, Belgium, Bermuda, British Virgin Islands, Bulgaria, Cayman Islands, Colombia, Croatia, Curaçao, Cyprus, Czech Republic, Denmark, Estonia, Faroe Islands, Finland, France, Germany, Gibraltar, Greece, Greenland, Guernsey, Hungary, Iceland, India, Ireland, Isle of Man, Italy, Jersey, Korea, Latvia, Liechtenstein, Lithuania, Luxembourg, Malta, Mexico, Montserrat, Netherlands, Niue, Norway, Poland, Portugal, Romania, San Marino, Seychelles, Slovak Republic, Slovenia, South Africa, Spain, Sweden, Trinidad and Tobago, Turks and Caicos Islands, United Kingdom.

And Late Adopters are starting to report in 2018:

Albania, Andorra, Antigua and Barbuda, Aruba, Australia, Austria, The Bahamas, Bahrain, Belize, Brazil, Brunei Darussalam, Canada, Chile, China, Cook Islands, Costa Rica, Dominica, Ghana, Grenada, Hong Kong (China), Indonesia, Israel, Japan, Kuwait, Lebanon, Marshall Islands, Macao (China), Malaysia, Mauritius, Monaco, Nauru, New Zealand, Pakistan, Panama, Qatar, Russia, Saint Kitts and Nevis, Samoa, Saint Lucia, Saint Vincent and the Grenadines, Saudi Arabia, Singapore, Sint Maarten, Switzerland, Turkey, United Arab Emirates, Uruguay, Vanuatu.

Whilst this data will allow HMRC to address non-compliance, it is also anticipated that it may be problematic for people who are compliant with their obligations. For instance:

  • A person who shows little foreign income on his tax return. Once HMRC receives information on the existing capital balance, they may assume that the capital was also the result of foreign gains and may request additional information in order to establish the origin of the balance.

  • HMRC may request documentation that is outside their powers or not related to the discovery. Hence it is important that compliant taxpayers should also seek professional advice and engage with the HMRC.

  • HMRC is likely to request that taxpayers sign a Certificate confirming that they are fully compliant with their UK tax obligations. This certificate may not be well worded, may not include reference to a particular tax period, and once signed, if there was a false statement, it can lead to prosecution. It is important for taxpayers to realise that this Certificate is optional and they are not obliged to sign it.

Requirement to Correct tax due on offshore assets

This requirement was introduced in April 2017 and will affect years past years. Corrections must be made by September 2018, prior to HMRC receiving CRS data.

If corrections are not made within the deadline, it can give rise to new offenses in relation to a “failure to correct”.

There will be large new penalties, starting at 200% of the tax due, and could be mitigated down to 100%. This is particularly relevant for inheritance taxes for instance, due to the tax being calculated on the value of the asset/estate.

HMRC will not accept human error or carelessness as excuses and will have powers to make the information public, effectively “naming and shaming” individuals whose tax bill is above £25k.

It will also add 4 years to the normal assessment period times and is proposing a 12-year time limit for offshore matters.

More information on:

Worldwide Disclosure Facility – WDF

One of the ways to disclose offshore liabilities is using the WDF. It is best to be used for common cases and it is not compulsory that a disclosure shall be done via this route. For more information visit:

Once registered online, the applicant will have 90 days to make the full disclosure and, for more complex cases, the deadline can be expanded for further 90 days.

It is used when there is an element of offshore liabilities, but once the facility is being used, both offshore and onshore liabilities shall be declared in full.

Although the WDF does not protect against prosecution, it is very unlikely that prosecution may take place. If there are concerns, the Contractual Disclosure Facility can be used:

Please get in touch if you have questions regarding the information above.

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