Requirement to Correct Requirement to Correct
This new legal requirement is included at Section 67 and Schedule 18
of the Finance (No. 2) Act 2017 and created an obligation for anyone who
has undeclared UK tax liabilities that involve offshore matters, or
transfers, to disclose the relevant information about this non-compliance
to HMRC before 30 September 2018.
Failure to disclose the relevant information to HMRC on or before 30
September 2018 resulted in the person becoming liable to a new
penalty as a result of their failure to correct (
FTC). The new FTC penalty is most likely to be much higher than the existing penalties, with a minimum penalty of 100% of the tax involved.
The Requirement to Correct will apply to undeclared:
Income tax, Capital Gains Tax (CGT), and Inheritance Tax (IHT)
The Requirement to Correct will only apply to liabilities arising from ‘offshore matters’ or an ‘offshore transfer'. Failure to notify chargeability Failure to make a return, or to meet an obligation to provide HMRC with other documents Errors in returns and documents
Requirement to Correctonly applies if
the non-compliance was committed before 6 April 2017. When
non-compliance was committed depends on the nature of the failure or
inaccuracy. Failing to notify chargeability occurred before 6 April 2017 if the
notification should have been made on or before 5 April 2017. A person
who has not been issued with a return by HMRC is obliged to notify HMRC
if they have a liability to Income Tax or Capital Gains Tax. This
notification should be made no later than 5 October after the end of the
relevant tax year.
Anyone who has failed to notify chargeability involving offshore
matters or transfers for any year up to and including 2015 to 2016 will
have failed to do so on or before 5 April 2017. They’re required to
correct the position on or before 30 September 2018. Failing to make a
return takes place the day after the final day on which the return
should have been delivered to HMRC. To avoid becoming liable to these
new higher penalties, a person must
have corrected the position by no later than 30 September 2018.
The Requirement to Correct will not cover any other taxes or return (such as PAYE and NIC
or corporation tax), but if you are making a disclosure and also have
(for example) VAT irregularities these should be disclosed at the same
time. Tax on employment income may be included if the employer no longer
exists (e.g. it has been liquidated) such that PAYE cannot be applied.
Companies subject to income tax will be within the scope of Requirement to Correct.
If you fail to correct on or before 30 September 2018, you will be liable to the new, tougher
FTC penalties. There are a number of elements to these penalties: The maximum penalty will be 200% of the tax not corrected. Reductions will be available for disclosure and cooperation, including whether a disclosure was prompted or unprompted. The minimum penalty will be 100% of the tax not corrected unless the disclosure was not voluntary in which case it will be 150%. The level of penalty mitigation offered will depend on how much assistance is given to by the taxpayer:
For telling: up to 30% of the maximum available reduction will be given For helping: up to 40% of the maximum available reduction For giving access to records: up to 30% of the maximum available reduction.
To receive the full reduction possible you must also provide
additional information to HMRC about anyone who encouraged, assisted or
facilitated you to carry out offshore tax evasion or non-compliance
('enablers'). HMRC will take this information into account when
calculating the reduction they will give you for the quality of
If you did not involve an enabler, tell HMRC this and they will
consider that you have met the requirement to provide additional
There may also be:
An asset based penalty of up to 10% of the value of the asset where the tax in any one year was over £25,000. Naming and shaming in the most serious cases and where over £25,000 per investigation is involved. Enhanced penalties of 50% of the amount of the standard penalty if assets or funds are moved to attempt to avoid the RTC Your
affairs may be complex, there may be international tax issues involved,
we can assess the position and objectively advise you as to the best
course of action whether it be through the Worldwide Disclosure
Facility, the Contractual Disclsosure Facility or the more regular
routes of voluntary disclosure. You can also see from the above that
how you interact with HMRC can be reflected in the eventual penalties
charged and mitigation of penalty loadings begins at the first point of
contact with HMRC or, in the case of voluntary disclosures, even before
that point. Contact UsWe have a long and proven track record of making voluntary disclosures to HMRC so if you wish to discuss matters in confidence and with no obligation please contact us on 01283 761 777 or email us using our Email Enquiry Form.