Offshore assets require new transparency and legal expertise
Her Majesty’s Revenue and Customs are looking at offshore assets with a new focus meaning that those with money in such schemes have to be aware that there is a heightened level of scrutiny.
The new legislation creates an obligation for taxpayers to disclose to HMRC any non-reported offshore taxable amounts by 30 September 2018.
Anyone with offshore bank or investments accounts, should be prepared to as both innocent and deliberate errors could now attract a penalty up to 200 per cent on the due tax.
Severe new penalties could hugely affect tax liabilities to be considered where there were assets, interests or business activities outside the UK, going back over the past two decades.
We would advise clients to review all offshore assets and activities and ensure full disclosure to HMRC of any omissions before 30th September 2018 to avoid falling victim to eye-watering sums. Many of our clients have bank accounts and investments in India, China and Africa could all be affected with this requirement.
Under the Common Reporting Standards HMRC is already receiving all the information from other countries so this is last opportunity to make full disclosure of those tax resident in the UK. After 30 September no doubt HMRC will be using the information it holds taxpayers offshore financial assets from overseas countries.
It has been shown that at the very least where the penalties do apply they will be at least as much as the outstanding tax itself! A scary thought for many.
You would be wise to check estimates of contingent liabilities to ensure the worst-case scenarios do account for the new ‘failure to correct’ regime, which will apply from the start of October.
As London experts in offshore tax advice we advise clients and all interested parties to take note as this is not only relevant for tax evasion involving hidden assets or knowingly undeclared overseas earnings, it also applies to mistakes, no matter how inadvertent. Additionally, out of date tax planning and technical errors and areas where HMRC could take a different view of the tax consequences of overseas arrangements in light of the UK’s complex tax avoidance legislation will also be under the spotlight.
As divorce lawyers in London also, we are acutely aware that this legislation may hugely increase the contingent tax liabilities to be factored into financial settlements for couples who have outstanding overseas related UK taxes still assessable as at the end of the 2016/17 tax year. Some of the liabilities may have arisen up to 20 years previously.
Examples of where corrective action may be needed ahead of the deadline – or else, where draconian new penalties from 1 October 2018 will need to be factored include:
- A trust structure put in place years ago where the tax advice is now out outdated and historical UK tax charges do apply.
- A non-UK domiciled individual with a portfolio managed overseas, which has accidently acquired UK situs assets.
- An overseas holiday home with associated bank accounts abroad where rental income or bank interest needs transparency.
- An interest in an “employee benefit trust” held in overseas territories.
- An overseas structure set up many years ago by an individual who later became UK resident and who unknowingly potentially became personally assessable to UK tax on all the income and gains arising in the structure under the UK’s “transfer of assets abroad” legislation.
It is indeed a hotbed, which will cause many a sleepless night for people who thought they were acting with integrity, but now could face financial headaches.
As overseas offshore experts in London, we at Pindoria Solicitors are fielding many a phone call and looking carefully into the small details for our clients.
Remember after 30 September 2018, the only defence where the new penalties would otherwise apply is that a person had a reasonable excuse for their failure to correct any oversight. The definition of reasonable excuse does not allow for margins of error.
If you need help on this complex matter, we are here to put your mind at ease. Please do not hesitate to contact us at Pindoria Solicitors.
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