UK and International Tax news

Requirement To Correct And Offshore Tax Avoidance Penalties Update

Tuesday 31st July 2018

The ‘requirement to correct’ (RTC) is a legal obligation for anyone who has undeclared UK tax liabilities relating to offshore matters to disclose this to HMRC by 30 September 2018. Tough new penalties will apply from 1 October 2018 to those who have failed to comply. HMRC has recently announced a non-statutory extension to the deadline in three specific circumstances.

  • Intention to use the Worldwide Disclosure Facility is notified to HMRC by 30 September 2018, by registering via HMRC’s Digital Disclosure Service, and the disclosure process is completed fully and accurately within the 90 day time limit required by the WDF, i.e. by 29 December 2018.
  • Intention to use the Contractual Disclosure Facility is notified to HMRC by 30 September 2018 and a completed form CDF1 is emailed to HMRC at which confirms to HMRC that a disclosure of deliberate behaviour involving offshore tax non-compliance is to be made which, if agreed, must be submitted within the 60 day time limit stipulated in the process.
  • If HMRC is already undertaking an enquiry into the taxpayer’s affairs and on or before 30 September 2018 the taxpayer informs the person conducting the enquiry that he wishes to make a disclosure of offshore tax non-compliance, an outline disclosure must be made to that person by 29 November 2018.

HMRC’s “Requirement to Correct” (RTC) rules, brought in per s.67 and Schedule 18 Finance (No 2) Act 2017, oblige taxpayers to make a disclosure of unpaid tax on assets, income and activities in other countries and transfers from the UK to other countries. Given the 30 September 2018 deadline on the horizon, HMRC is urging taxpayers and agents to check now whether there is a need to make a correction under the RTC. From 1 October 2018, the minimum penalty will be 100% of the tax owed and could be much higher depending on circumstances.

Only tax non-compliance committed before 6 April 2017 falls within the RTC and HMRC, in particular, must have been able to make an assessment to recover the tax in question on 6 April 2017, or make a determination to recover the inheritance tax in question on the day after Royal Assent to the legislation is granted.

If a taxpayer has other undeclared income not directly covered by the RTC rule, disclosure to HMRC should be done as soon as possible in order to reduce any penalties that may otherwise be charged.

The RTC has no minimum level cut-off point so anyone with any unpaid offshore tax will need to make a disclosure. This means, for example, that taxpayers who have simply rented out a holiday home in another country and failed to declare the income should check their position. In addition, those who have moved to the UK from abroad but who have, for example, assets or income, perhaps from family holdings or businesses, in their country of origin may need to make sure that they have properly declared their tax position.

The RTC applies to income tax, capital gains tax and inheritance tax and therefore mainly applies to individual taxpayers. Companies that pay income tax, for example, as non-resident landlords, will also need to ensure they have paid the correct tax and, if necessary, make a disclosure. Trustees, settlors and beneficiaries of trusts with overseas interests may also need to check whether they have unpaid UK tax liabilities.


If you would like further information on the RTC rules, please contact Keith Rushen on 0207 486 2378.

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