Assessing Time Limits for Offshore Matters
If HMRC want to collect tax from UK tax residents for past years they have to be able to issue an “assessment”. Legal deadlines apply to issuing assessments: known as the “Assessing Time Limits”. The normal rules apply in "onshore" cases. And there are also further special and complicated rules where so-called “Offshore Matters” are concerned. These Offshore rules apply to: Income Tax; Capital Gains Tax; and Inheritance Tax – but not to VAT.
The time limits in Onshore cases are explained on our page "Time Limits for Assessment”.
Penalties in Offshore Matters cases are explained on our page "Penalties for Offshore Matters".
What are Offshore Matters?
Offshore Matters include: income arising from a source in a country outside the United Kingdom (e.g. an interest-bearing overseas bank account); ownership of assets situated or held in a territory outside the UK (e.g. a person who owns or disposes of land or buildings overseas); making an “offshore transfer” which makes the loss of tax significantly harder for HM Revenue and Customs to identify (e.g. moving funds from a bank account in a country which is a signatory to the Common Reporting Standard to a non-reporting tax haven jurisdiction).
When the Normal “Onshore” Time Limit Rules Still Apply in Offshore Cases
Unless specific Offshore rules apply (as below) then the Assessing Time Limits in Offshore cases are the same as in Onshore situations: see Time Limits for Assessment. E.g. there are no special Offshore rules for VAT, so the Onshore rules always apply.
The two most usual Income Tax situations where the Onshore rules apply in Offshore Matters cases is where tax has been underpaid due to: (a) Errors in a Tax Return caused by the “Deliberate Behaviour” of the taxpayer, or someone acting on their behalf; and (b) in cases of Failure To Notify chargeability to tax. In those instances, the Onshore rules apply, and HMRC can issue assessments to collect tax for any of the 20 years prior to the date of the issue of the assessment.
Time Limits for Offshore Assessments Issued After 5 April 2021
The Normal Time Limits for Errors in a Return for Onshore cases of: 4 years in cases where reasonable care is taken; and the Extended Time Limit of 6 years in cases of carelessness; have been replaced for years after 2012/13 with a single 12-year time limit. So HMRC can issue assessments for any of the 12 tax years prior to the date of the issue of the assessment.
However, for 2013/14 and 2014/15 that Offshore extension only applies in cases of "Careless Behaviour".
This “Offshore Extended Time Limit” does not apply in certain instances such as: where HMRC could reasonably be expected to have raised an assessment within the Onshore Time Limits based on information received from a foreign tax authority under EU tax law; or by way of an agreement between the UK and the other country (e.g. information received under the Common Reporting standard; or under a tax treaty Exchange of Information clause). In those cases, the normal Onshore Assessing Time Limits will apply.
The normal 20 year Onshore Assessing Time Limits always apply in cases of Failure To Notify and Deliberate Errors in a Return.
Special Failure To Correct Rules for Assessments Issued By 6 April 2021
These rules are now of interest only to people who received such assessments and have appealed on the grounds that the assessments were invalid under the time limit regulations.
The Failure To Correct (“F2C”) regime applies for all years up to 2015/16. For Assessing Time Limit purposes the F2C rules only applied to assessments which were issued by HMRC prior to 6 April 2021. However, the F2C penalties can be applied for any years up to 2015/16 where HMRC were within time to issue an assessment - including cases where the assessment was issued after 5 April 2017: see above.
Those rules were complicated, but in essence, during the tax years 2017/18 to 2020/21 where they wanted to issue assessments for Offshore Matters for earlier years then HMRC had to consider whether they could have issued assessments using the Onshore rules at 5 April 2017. If they could have done so then they could still issue assessments for Offshore Matters for years which would otherwise have been out of date – as long as they did so by 5 April 2021.
What does it mean for me?
If HMRC are trying to collect tax from earlier years where you have income or gains arising connected to an Offshore Matter then you need to make sure they are not trying to assess years that are barred by statute as being “out of time”.
How can Lynam Tax Enquiry Experts help me?
Lynam Tax Enquiry specialists are experts in tax assessment negotiations. We can use our vast experience and expertise to consider if the tax inspector has the legal right to reopen years where they want to collect extra tax (plus interest and penalties). We have helped hundreds of taxpayers in cases where we have persuaded the tax authorities to forego interest and penalties for many years where they have ultimately agreed that the law prevents them from issuing assessments.
IF YOU NEED ADVICE AND HELP ABOUT YOUR OFFSHORE TAX ISSUES FOR PAST YEARS THEN CALL:
PAUL LYNAM : 0845 643 9997 or
ANDREW NUTBROWN : 0771 877 8710
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