Today marks the passing of less than 3 weeks to go until the closure of the Requirement To Correct (“RTC”) window at midnight on 30 September 2018 and the worldwide adoption of the Common Reporting Standard (“CRS”).
The Finance (No. 2) Act 2017 in s.18 and s.67 created an obligation for anyone who has undeclared UK tax liabilities (involving income or assets outside the UK) to disclose those to HMRC as a final opportunity to allow clients, and their professional advisers, to voluntarily put things right before they are potentially discovered in any case via CRS information exchanges.
After 30 September 2018, the basic penalty is 200% of the tax due unless you have registered for the Worldwide Disclosure Facility (“WDF”). In the most serious cases the penalty can increase to 300%, together with a further penalty of 10% of the assets in question and potential naming and shaming.
The penalties can be mitigated in certain circumstances, but never less than 100% of the tax due even if the taxpayer discloses voluntarily. Where a taxpayer has not disclosed voluntarily the penalty will not be reduced to less than 150%, but HMRC will give reductions depending on the amount of assistance the taxpayer provides. In order though to obtain the full reduction the taxpayer must give HMRC full details of all offshore assets held and details of anyone, or any entity, who has encouraged, assisted or facilitated the tax evasion.
It is important to stress that, unlike the current penalty regime, the new penalties after this month will focus less on the taxpayer’s motives. HMRC’s view is that taxpayers will already have committed the original failure and failed to respond to previous publicity and previous disclosure opportunities (such as the LDF) and now finally have also failed to respond to the RTC legislation.
Furthermore, new legislation within s.166 of the Finance Act 2016 (Appointed Day) Regulations 2017 created a set of new statutory criminal offences that will make it a lot easier for HMRC to criminally prosecute offshore tax evasion cases from October 2018 onwards i.e. within days of the end of the RTC window. As the offences are statutory offences they do not require the prosecution to prove dishonest intent. This could have serious consequences both for individual clients, as well as any overseas service provider in relation to the corporate criminal offence.
There is a very limited window now left in which to regularise any outstanding liabilities before taxpayers become subject to the stringent new penalties.
What Can Trident Tax do to Help?
At Trident Tax we have developed a transactional diagnostic tool, on a completely anonymous basis and at no cost, that will review historical client structures within the current RTC window. The questionnaire can be completed and submitted electronically in a pdf format and normally takes about 20 minutes to complete.
Once the completed questionnaire is received we will conduct an initial review of the structure and produce a short report free of charge which will highlight any areas of concern and where irregularities are identified and outline further action required within what is left of the RTC window.
We have now produced hundreds of these reports and in our experience, irregularities have typically arisen entirely unintentionally in relation to simple administrative oversights caused by third parties or issues unbeknown to corporate officers or trustees, or simply because previously correct advice has since become obsolete or disqualified.
Regardless of the underlying reasons, the RTC window is the final chance to address undeclared UK tax liabilities from the past within the current penalty framework before the imposition of much more severe sanctions.
If you would like to arrange to arrange to receive a copy of the diagnostic tool for any of your clients, please contact us at diagnostic@tridenttax.com or call your local office.