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HMRC's tougher approach to offshore tax evasion

Newsletter issue - February 2017.

HMRC have implemented various measures over recent years designed to encourage those not paying the right amount of tax across their offshore tax affairs to make full disclosures. Whilst there has been a positive approach to the facilities provided, HMRC have recently reminded taxpayers that things are about to get even tougher for those who try to hide investments offshore.

To date, over 100 countries have committed to exchange information on a multilateral basis under the Organisation for Economic Co-operation and Development Common Reporting Standard (CRS) ,which means that HMRC will be receiving new financial information about their customers from more than 100 jurisdictions - this includes details about overseas accounts, structures, trusts, and investments - and they are already using information, supplied by overseas banks, insurers, and wealth and assets managers, to identify the minority who are not paying what they owe.

So what has changed? All HMRC offshore disclosure facilities closed with effect from 31 December 2015. Up to that date, HMRC offered various incentives to encourage people to come forward and clear up their tax affairs. That's no longer the case, but before automatic exchange and new sanctions come into force, the Worldwide Disclosure Facility (WDF) offers a final chance to come forward before HMRC use CRS data and toughen their approach to offshore non-compliance.

The facility opened on 5 September 2016. After 30 September 2018, new sanctions under a new 'Requirement to Correct' approach will be introduced that reflect HMRC's toughening approach. Disclosures can still be made after that date, but those new terms will not be as good as those currently available.

Anyone who wants to disclose a UK tax liability that relates wholly or partly to an offshore issue can use the facility. An offshore issue includes unpaid or omitted tax 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.

It also includes funds connected to unpaid or omitted UK tax not included above, that have been transferred to a territory outside the UK or are owned in a territory outside the UK.

A regular check should be made to ensure that all UK tax liabilities have been declared. If in doubt, seek professional advice in the first instance.