Under the Requirement to Correct Legislation, those with any unpaid taxes arising from overseas assets, have until 30 September to advise HMRC of the problem, and benefit from ‘normal’ penalties for an unprompted disclosure of typically between 10% and 30% of the tax due.
As of Friday 15 June, there were just 100 days left until that deadline.
Those who do not correct by 30 September will face massive new ‘failure to correct’ penalties. These start at 200% of the underpaid taxes, with the minimum penalty possible being 100%. A further uplift of 50% of the penalty imposed (a maximum of 300% of the tax) could be applied if HMRC can demonstrate that tax was deliberately evaded, by moving assets between jurisdictions. Finally, there is the possibility of a new ‘asset-based’ penalty of up to 10% of the value of the asset, and where taxes exceed £25,000, individuals may be ‘named and shamed’.
These penalties relate specifically to the ‘failure to correct’ and so the behaviour that led to the initial failure to declare the income or gains is irrelevant.
Despite the looming deadline, HMRC has not yet clarified whether those with a disclosure to make need to have registered their intention to disclose the errors by 30 September, made a basic outline disclosure, or if comprehensive disclosure needs to have been made and accepted by HMRC by that date.
What you need to do
Taxpayers should act now in order to provide as much detail as possible, in order to minimise the risk of an HMRC argument that too little has been disclosed.