Penalties in Offshore Matters

Harsh Sanctions since 1 October 2018

Anyone with tax irregularities relating to any offshore issues is now subject to the ultra-harsh Failure To Correct (F2C) penalties.  The F2C sanctions include:

  • the normal rolling 20 year time limit will still apply to cases involving deliberate errors.  But in cases of innocent or careless errors (made by the taxpayer or any agent) the usual 4 and 6 year limits have been increased: e.g. 2011/12 may be assessed up to 5 April 2021.
  • Standard penalties are a minimum of 100% of the tax lost.  But that minimum 100% penalty will only be available in cases of full unprompted disclosures.
  • In other cases (i.e. unprompted or incomplete disclosures) the standard penalties start at 150%, and can go up to 200%.  So the penalty alone can be double the previously undeclared tax.amount.
  • There could then be a yet further penalty of up to 50% of the initial penalty (i.e. up to 300% of the tax!), if an asset was deliberately moved to an alternative offshore jurisdiction in order to avoid detection.  So the tax plus penalty can be quadruple the amount of tax itself!
  • Worse again, where the undeclared tax is greater than £25,000 in any year, there can be a still further penalty up to 10% of the value of the offshore asset.
  •  And for more bad news, the "naming and shaming" provisions could also apply: meaning personal details can be published - where the undeclared tax is more than £25,000 for all years, and HMRC are not happy with the level of co-operation.
  • 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".

How can Lynam Tax Enquiry Experts help me get a lower penalty?
Lynam Tax specialists are experts in tax penalty negotiations. We have over 90 years' of experience in negotiating tax penalty levels, and can use our expertise to substantially reduce, and sometimes eliminate, the penalties that the tax inspector is demanding. We have helped hundreds of taxpayers achieve substantially lower penalties than those first sought by the taxman; including zero penalties in many cases. 

*For Expert Advice, Guidance and Support: Call Paul Now: 0845 643 9997

*PS: If you, or a client, are facing HMRC penalties Lynam Tax Enquiry Experts can help.  The sooner in a tax enquiry or dispute you involve us the more we can potentially save: in tax, interest and penalties - and general stress and worry.


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