HM Revenue and Customs (HMRC) has given UK taxpayers until 30th September 2018 to come forward and declare any foreign income or profits from offshore assets. From 1st October, there will be new harsher penalties for those who have failed to make a full declaration and pay their tax liabilities.

New legislation called ‘Requirement to Correct’ requires UK taxpayers to notify HMRC about any offshore tax liabilities relating to UK income tax, capital gains tax, or inheritance tax.

For those taxpayers with overseas interests and yet to act time is running out. In case UK resident taxpayers have forgotten or were unaware, taxpayers are required to declare their worldwide income and gains to HMRC via their annual self-assessment tax return. It does not matter whether the income and gains enter the UK.  For example, any UK resident taxpayer renting out a property abroad, transferring income and assets from one country to another, or even renting out a UK property when living abroad could give rise to a UK tax liability.

Rt Hon Mel Stride MP, Financial Secretary to the Treasury, said:

“Since 2010 we have secured over £2.8bn for our vital public services by tackling offshore tax evaders, and we will continue to relentlessly crack down on those not playing by the rules.

This new measure will place higher penalties on those who do not contact HMRC and ensure their offshore tax liabilities are correct. I urge anyone affected to get in touch with HMRC now.”

From 1 October 2018, more than 100 countries, including the UK, will be able to exchange data on financial accounts under the Common Reporting Standard (CRS). CRS data will significantly enhance HMRC’s ability to detect offshore non-compliance and it is in taxpayers’ interests to correct any non-compliance before that data is received.

The most common reasons for declaring offshore tax are in relation to foreign property, investment income and moving money into the UK from abroad.

As at 31st July 2018, over 17,000 people have already contacted HMRC to notify them about tax due from sources of foreign income, such as their holiday homes and overseas properties.

Taxpayers still have time to put their house in order tax. Three options are available to enable taxpayers to start the process of correcting their tax liabilities:

  1. Use HMRC’s digital disclosure service as part of the Worldwide Disclosure Facility or any other service provided by HMRC as a means of correcting tax non-compliance;
  2. Advise an officer of HMRC during the course of an enquiry into their tax  affairs; or
  3. Seek professional advice before contacting HMRC.

Whatever option is chosen, taxpayers must notify HMRC by 30th September of their intention to make a declaration. Taxpayers will then have 90 days to make a full disclosure and pay any tax liabilities to HMRC. If taxpayers are confident that their tax affairs are in order, then they do not need to worry or take any action.

However, HMRC has recommended taxpayers who are unsure of their position to seek advice from a professional tax adviser or agent. Furthermore, HMRC have advised taxpayers that “laws and specific circumstances can change, advice that you took in the past may no longer be valid.”

HMRC has started receiving more information about international investments and financial structures held offshore by UK tax residents. From 1st October 2018, in all cases where a penalty applies, there will be a standard penalty equivalent to 200% of the tax liability which should have been disclosed to HMRC under the ‘Requirement to Correct’ but was not. Under the new legislation HMRC will also be targeting ‘enablers’, those who help others to evade tax offshore. Enablers will also face civil penalties, criminal prosecution and public naming. Taxpayers should act before it is too late.