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Consultation on extending offshore time limits for assessment

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HMRC is consulting until 14 May 2018 on the design principles for legislation to extend the tax assessment time limit to a minimum of 12 years for mistakes or non-deliberate errors involving offshore income, gains or chargeable transfers. The current time limit of 20 years for deliberate behaviour will remain.

The extended time limit will apply to the taxes currently in scope for the requirement to correct rules and other civil measures tackling offshore tax evasion, meaning income tax, CGT and IHT. The government is also considering applying it to corporation tax. The commencement date would be 1 April 2019 for IHT (and, if included, corporation tax) and 6 April 2019 for income tax and CGT.

HMRC recommends basing the scope of the proposal around the definitions of ‘offshore matter’ and ‘offshore transfer’, as described in the requirement to correct rules. Where both offshore and onshore tax is involved, this would be apportioned on a just and reasonable basis, using the existing rules set out in the requirement to correct.

The government announced at Autumn Budget 2017 that it would legislate to extend this time limit. The reason for the change is that establishing the facts about offshore transactions, particularly if they involve complex offshore structures, can take much longer than domestic sources of income. The current assessment time limits of 4 years (and 6 years for carelessness) are not long enough to cope with offshore non-compliance.