Requirement to correct
Don't get caught out by overseas assets
The deadline for volunteering undeclared income and gains from overseas assets (the so-called Requirement to Correct) passed a long time ago (30 September 2018).
Where undeclared taxes from overseas assets are discovered after 30 September 2018, HMRC will seek to charge a minimum penalty of 100%; 150% if a disclosure is prompted (up to a maximum of 200%) of the lost taxes. The only way to avoid these Failure to Correct penalties is to claim a realistic and supportable ‘reasonable excuse’. In practice this sounds easy, but it is not, and HMRC challenge nearly every such defence.
The legislation says, "where [a person] relied on any other person to do anything that cannot be a reasonable excuse unless [the person] took reasonable care to avoid the failure". This would therefore exclude reliance on any historic professional advice from an accountant, solicitor, or independent financial advisor for instance.
Spontaneous action taken now by affected persons to check their positions would assist a 'reasonable excuse' defence. Any firm involved in giving the original advice, the appointment of Trustees or assisting in any way with the establishment of an overseas structure, will be regarded as an 'interested person'. If the check is carried out by an 'interested person', it will be treated as 'disqualified' advice and hence disregarded. Any review should therefore be conducted by an independent third-party advisor other than the original advisors (e.g. Crowe UK LLP) and may require fresh legal opinion from unconnected Tax Counsel to see if complex 'arrangements' remain robust or are otherwise flawed.
Even years down the line Failure to Correct penalties may still be charged because of extended time limits that enable HMRC to assess overseas tax liabilities that would normally be out of time.
How Crowe can help
If you are unsure of your current tax obligations, our experienced team can advise you on the best course of action. We can run ‘reasonable excuse’ defences often saving thousands of pounds. We can also challenge the use of the extended time limit legislation in order to head off costly tax assessments.
Get in touch with Sean Wakeman, or your usual Crowe contact.
