Under the new Requirement to Correct (RTC) rules, undeclared UK tax liabilities in respect of offshore matters will face harsh penalties if they are not dealt with by 30 September 2018, and these rules may apply to Employee Benefit trusts and other remuneration trusts.

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 give a ‘last chance’ for taxpayers to disclose any such offshore evasion prior to the CRS coming into force later in 2018.

The RTC  will apply to undeclared:

  • Income tax,
  • Capital Gains Tax (CGT), and
  • Inheritance Tax (IHT)

but does 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 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 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 s86 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 NIC, IHT is dealt with separately and may have been overlooked. It now needs dealing with by 30 September 2018 to ensure penalties do not result, which is the same deadline as that for providing information to HMRC in respect of schemes which have registered for the final Disguised remuneration settlement opportunity

HMRC's guidance on RTC does not cover disguised remuneration settlements and it is not clear what will happen where a taxpayer has not completed the DR settlement process by 30 September 2018. Anyone who has concerns here is 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 will not apply to amounts payable on DR settlement under voluntary restitution. 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. The original deadline for registering an interest in settling was 31 May 2018 but HMRC are currently still accepting registrations.

Links:

Requirement to Correct

Disguised Remuneration Final Settlement opportunity

 


 

Wouldn’t it be great and think how much TIME it would SAVE you if someone:

  • READ all the latest tax news, case decisions, new legislation and articles in tax and then summarised them for you?
  • Only alerted you to things that are RELEVANT to you?

How about if that someone also:

  • Updated those summaries in REAL TIME for you
  • ADDED examples, planning points, toolkits and calculators, and
  • Linked all that information together and also provided you with CPD?

Thousands of firms of accountants and advisers are already using www.rossmartin.co.uk as their primary TAX resource.

At a cost of just £1 per day, it’s a no brainer: FREE up your MIND and your TIME (and your wallet).

And...we run our Virtual Tax Partner support service, if you need assistance with a particular query or technical issue.

Leave your comments

Post comment as a guest

0
Your comments are subjected to administrator's moderation.
terms and condition.
  • No comments found