9 Months until Ultra-Tough Penalties for Offshore Tax Irregularities

There is now a legal “requirement to correct” your tax position for anyone with historic tax liabilities connected to offshore issues. Anyone who with such problems which existed up to 5 April 2017 has until 30 September 2018 to regularise their tax compliance. After that they can be liable to new ultra-harsh penalties:  up to 200% of the under-declared tax plus 10% of the value of the relevant asset.

The legal Requirement to Correct (R2C) means anyone with tax irregularities relating to any offshore issues is obliged to disclose them: or face tough new penalties or prosecution.  Anyone who fails to correct any non-compliance (existing up to 5 April 2017) by 30 September 2018 will then be subject to the new harsh Failure To Correct (F2C) penalties.  Failure To Correct sanctions include:

  • Where the normal assessment period for assessing the tax concerned of 4, 6 or 20 years (depending on the cause of the error) would end between 6 April 2017 and 4 April 2021 the assessment period will be extended to 5 April 2021: i.e. the normal rolling 20 year time limit will no longer apply to those cases: and could be extended to 24 years!
  • Penalties will be a minimum of 100% of the tax lost.  And that minimum 100% penalty will only be available in cases of full unprompted disclosures.
  • In other cases (i.e. unprompted or incomplete disclosures) penalties can be more than 100%, and up to 200%, of the previously undeclared tax.
  • On top of that: there could then be a yet further penalty of 50% of the initial penalty (i.e. 300% of the tax!), if an asset was deliberately moved to an alternative offshore jurisdiction in order to avoid detection.
  • And worse, in the most serious cases there can be a still further penalty up to 10% of the value of the offshore asset.  For example, if a property was owned in Spain worth £1 million linked to under-declared rental income then in addition to the 300% tax geared penalties above, there could be an additional asset-based charge of £100,000.
  • As usual, interest will be charged at a commercial rate on the late paid tax.
  • The total amount of tax, interest, and penalties could easily vastly exceed the total value of the asset itself.
  • And the course, HMRC reserve the usual right to prosecute in the most serious cases.
  • Where HMRC achieve a conviction then they will use the Proceeds Of Crime Act to confiscate the so-called “criminal assets”.

Escape Clause
The Failure To Correct sanctions will not apply to anyone who has made a full confession (e.g. through the Worldwide Disclosure Facility or the Contractual Disclosure Facility) by 30 September 2018.

How can Lynam Tax Disclosure Experts help me?
Our Tax Disclosure Specialists have a huge amount of experience in dealing with voluntary disclosures in respect of UK residents with offshore bank accounts and other assets. We have the training, knowledge, skills and deep experience to properly manage your offshore disclosure to HMRC.  We can reduce the stress and get the best solution for you. And if you are already under investigation our expertise will get you the best possible outcome.  HMRC use dedicated specialist investigators to deal with offshore issues: you need dedicated, experienced, and committed experts on your side.


Paul Lynam: 0845 643 9997

Andrew Nutbrown: 0771 877 8710