Following this year’s spring statement HMRC published its updated strategy on tackling offshore tax compliance, ‘No Safe Havens 2019’ which extended it’s 2014 aims by targeting offshore avoidance as well as evasion.

The revision of HMRC’s strategy followed the introduction of:

  • The extension of discovery assessment time limits  for non-deliberate errors involving offshore matters from four or six years to twelve years from April 2019
  • Severe ‘failure to correct’ penalties for those who did not meet the requirement to correct deadline for undeclared tax relating to offshore matters at the end of 2018
  • The introduction of the trust registration service in 2017.

Earlier this year HMRC confirmed that during 2018 they received reports about the offshore financial interests of around three million UK residents and that Common Reporting Standard data (which had not previously been available) had revealed that one in 10 UK taxpayers have an offshore financial interest. This does not mean that 10% of us have undeclared offshore income but as this is new information to HMRC they will surely take note and act accordingly.

The CIOT have recently reported that HMRC have been writing to taxpayers advising that they have information about offshore income and gains which may be taxable in the UK. The letters enclose certificates of tax position to allow these individuals to declare whether they do, or do not, need to bring their tax affairs up to date.

If they tick the latter box they are confirming:

“I have declared all of my offshore income, assets and gains which are taxable in the UK ” and

“I do not have additional tax to pay”.

It is hard to see how many taxpayers would be able to tick this box without first seeking detailed advice on the tax position of their overseas income and gains (and the letter only allows 30 days to respond) but important to note that the fact that HMRC have this information does not necessarily mean any UK tax is due or that the taxpayer’s submitted returns are wrong. There is no obligation to complete the certificate and HMRC have advised the CIOT that they will accept a response by letter as an alternative should an individual choose not to complete the declaration. This may be a better option for some taxpayers as it allows further details and explanation to be provided.

It seems clear that when HMRC say in the No safe havens 2019 document that they will respond to those that break the rules, and those that help them, with “vigorously enforced sanctions and by collecting the tax due” that they mean it.

The Worldwide Disclosure Facility remains open and with maximum failure to correct penalties at 200% of the tax due but reductions available to halve this with full cooperation and disclosure, taxpayers who are aware of undeclared offshore income and gains would do well to seek advice and consider making an unprompted disclosure sooner rather than later.

Links to our guides:

Requirement to Correct (Offshore Evasion)

Offshore income toolkit

Worldwide Disclosure Facility

Discovery assessments

External links:

No safe havens 2019 HMRC’s strategy for offshore tax compliance

CIOT update on HMRC letters and “certificates of tax position” to individuals with offshore income, gains & assets