Disclosing The Undisclosed Foreign Income
From 6th April 2017, the Requirement to Correct (RTC) (HMRC Ref CH123050) rule was established to encourage taxpayers to improve accuracy regarding foreign income reporting. All taxpayers with overseas interests and issues with their tax position (such as historically undisclosed income) will be affected by RTC. It’s important to act sooner rather than later. Failure to correct (FTC) (HMRC Ref CC/FS17) any issues by the deadline may result in the imposition of severe penalties.
Bear in mind, too, that this requirement doesn’t only cover income tax. The scheme encompasses various tax areas (capital gains and inheritance tax, for instance) and set-ups (including partnerships and trustees).
When is the deadline?
The initial Requirement to Correct period commenced on 6 April 2017, with the stricter Failure to Correct scheme beginning on the 1st of October 2018. Under RTC, taxpayers needed to be able to demonstrate that they had taken steps to amend their UK tax position by 30th September to avoid the harsher penalties of FTC (though in certain circumstances it was possible to procure an extension to the deadline).
How can Taxsteins Ltd help?
The pressures of running a business or managing assets overseas are considerable: as such, it’s easy to miss deadlines or make mistakes with accounting. However, even the smallest of historic mistakes – if undisclosed – can cause real problems under the Requirement to Correct scheme.
Our specialist skillset – with a team of skilled accountants and expert tax advisers in our employ, many of whom have years of experience with overseas clients – makes us uniquely qualified to assist with all Requirement to Correct/Failure to Correct issues. Our list of services includes:
- Review all UK tax affairs (such as previous returns) for individuals who currently have (or who have ever had) offshore financial interests.
- Reviewing of remittances, offshore structures, etc.
- Ensuring that tax returns were submitted for any years in which the taxpayer owed tax (either on income or gains).
- Checking advice received in the past – was the taxpayer updated on their obligations if their circumstances changed? Was the taxpayer informed of any new and relevant legislation?
- Performing ‘health checks’ of current and historic tax positions. This is a worthwhile exercise for any taxpayer with offshore financial connections. Even if they feel certain they have not made any errors with submissions/notifications in the past. The process will provide extra security should HMRC decide that additional tax may be due.
- Composing a defense and investigating the potential to appeal. It should appear that tax may be due or penalties are likely to be imposed.
The requirement to Correct: What To Do Now
The 30th September deadline may have passed, but there is still time to act. Harsh penalties (up to 200 of the tax due) and additional fines (including asset-based charges). That will be levied if HMRC believes that a taxpayer has failed to make a disclosure. So it is imperative to instruct a chartered tax adviser to review your position as soon as possible.