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Consultation on penalties for failure to correct past offshore evasion

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HMRC is consulting until 19 October 2016 on proposals for a new set of penalties for those who fail to disclose any undeclared UK tax liabilities in respect of an offshore matter by 30 September 2018. Two penalty models are proposed: one ranging from a minimum of 100% to a maximum of 200% of the tax involved, plus further asset-based penalties; and another involving three different levels, depending on whether the disclosure was prompted or unprompted. Legislation for the new penalties will be included in Finance Bill 2017.

The new ‘requirement to correct’ would apply to both individuals and businesses with undeclared UK liabilities related to offshore interests.  This would also include non-resident trustees.

For the purposes of the requirement to correct, ‘offshore interests’ will include UK tax liabilities relating to:

·         income arising from a source in a territory outside the UK;

·         assets situated or held in a territory outside the UK;

·         activities carried on wholly or mainly in a territory outside the UK; or

·         anything having effect as if it were income, assets or activities of a kind described above.

The definition will also include funds connected to a UK tax liability not within the above that are:

·         received in a territory outside the UK;

·         transferred to a territory outside the UK; or

·         owned in a territory outside the UK.

HMRC would expect ‘correction’ to involve disclosure through the digital disclosure portal, or the contractual disclosure facility, although this could also include direct discussions with HMRC, such as with an existing customer relationship manager or as part of an ongoing enquiry.

See http://bit.ly/2bzgHgc.

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