Under the Requirement to Correct (RTC) rules, undeclared UK tax liabilities in respect of offshore matters faced harsh penalties if they were not dealt with by 30 September 2018 and these rules may have applied to Employee Benefit Trusts and other remuneration trusts.

This is a freeview 'At a glance' guide to the Requirement to Correct (RTC) rules and Employee Benefit Trusts.

The requirement to correct deadline has now passed and it is too late to make a compliant correction. The following is retained for reference only.

Under the Common Reporting Standard (CRS) HMRC will receive information from hundreds of countries on bank accounts and financial investments in order to help tackle offshore tax evasion.

Measures included in Finance (No2) Act 2017 gave a ‘last chance’ for taxpayers to disclose any such offshore evasion prior to the CRS coming into force later in 2018.

The RTC applied to undeclared:

  • Income Tax.
  • Capital Gains Tax (CGT).
  • Inheritance Tax (IHT).

It did not apply to PAYE.

Depending on the specifics of the planning undertaken it is possible that an offshore Employee Benefit Trust or other Disguised remuneration planning trust such as remuneration trusts may be within the scope of IHT and Income Tax liabilities may also apply.

  • Whether this applies will depend on how the trust deed is written and what has happened to the trust and its assets as part of or following Settlement with HMRC or within the overall life of the trust.
  • In many cases, the trustees and beneficiaries will not be aware that they have any liability to IHT, meaning that an IHT account is unlikely to have ever been delivered. In these circumstances, a 20-year time limit will apply as a minimum.
  • Where a settlement has been reached with HMRC and IHT has not been properly dealt with (or not dealt with at all), there is a risk that it will be treated as a failure to correct if the position is not addressed by 30 September 2018.
  • Penalties for failure to correct are 100% of the uncorrected tax as a minimum plus possible asset-based penalties of 10% where the tax in any year exceeds £25,000.

Although s.86 IHTA 1984 applies to exempt many employee trusts from IHT, not all trusts meet all of the conditions for exemption and the position should be checked. Even where a settlement has been reached with HMRC in respect of Income Tax and National Insurance Contributions (NICs), IHT is dealt with separately and may have been overlooked. If it was not dealt with by 30 September 2018 penalties may result, although if a settlement was ongoing with HMRC under the Disguised remuneration settlement opportunity before that date, it may be that the RTC conditions were met. 

HMRC's guidance on RTC does not cover disguised remuneration settlements. Anyone who had concerns here was advised to contact the HMRC officer dealing with their DR settlement or contact HMRC at This email address is being protected from spambots. You need JavaScript enabled to view it..

It is clear that RTC did not apply to amounts payable on DR settlement under voluntary restitution and to UK sourced income. See Disguised Remuneration Final Settlement opportunity for more details on when this applies.

If you would like help reviewing the IHT position of an employee benefit or other remuneration trust or in reaching a settlement with HMRC please contact us via our Virtual tax partner support portal at www.VtaxP.co.uk. 

Useful links on this topic

Requirement to Correct (Offshore evasion) 
A summary of the new Requirement to Correct (RTC) undeclared tax relating to offshore matters and the tougher penalties that will apply for a Failure to Correct (FTC).

Common Reporting Standard (CRS)
The OECD's standard for the automatic exchange of information. Financial institution reporting of overseas investments to the authorities in the countries of residence.

Disguised Remuneration Final Settlement opportunity 
HMRC have issued guidance for agents on a new settlement opportunity for disguised remuneration loans which are not subject to the loan charge.


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