Offshore tax matters
Automatic Exchange of Information agreements are made between the UK and other countries.
These agreements allow the exchange of information between tax authorities of different countries about financial accounts and investments to help stop tax evasion.
The standard for all automatic exchange of financial information is known as the Common Reporting Standard (CRS) which is an international agreement, currently with 100 countries, to exchange financial information between banks, financial institutions and tax authorities.
The first reports under the CRS were made by the “early adopter” countries (50 out of the 100) in September 2017. The remaining 50 countries, “late adopters”, will have submitted their first reports by September 2018.
The information which has and will be exchanged will include, name, address, bank interest, and account balance. Where there may be nominee entities, such as offshore companies and trusts, the financial institution will report on the relevant “controlling person” or beneficial person(s).
Where individuals have previously not reported income or gains to the UK tax authorities, it is possible to utilise HMRC’s Worldwide Disclosure Facility (WDF) in order to regularise matters.
Requirement to Correct (RTC) and Failure to Correct (FTC)
HMRC introduced legislation surrounding a new obligation for taxpayers to ensure that undeclared UK tax liabilities (income tax, capital gains tax and inheritance tax) in respect of offshore interests relating to all periods up to and including 5 April 2017 are fully disclosed to HMRC before 30 September 2018.
The importance of the end date of 30 September 2018 is that this corresponds with the date by which all countries who have committed to the OECD’s Common Reporting Standard (CRS), will be exchanging data with HMRC.
Taxpayers who fail to correct historic errors in the “RTC period” (6 April 2017 to 30 September 2018) will have to face up to a new severe penalty regime for their FTC (potentially up to 200% and in the most serious of cases and a 10% asset based penalty).
Interestingly and more importantly, the legislation applies to those who have deliberately evaded tax and to those who have not taken reasonable care.
For more information and to arrange a free initial consultation please contact Doug Sinclair.