Worldwide Tax Disclosure Facility
In 2015 HMRC announced plans for a new punitive penalty regime with minimum penalties of 100% of tax due for individuals with income sources from outside of the UK.
The new penalties will be implemented from September 2018 and in the meantime HMRC are encouraging taxpayers to review their tax affairs and ensure full compliance under the ‘Requirement to Correct’ (RTC) before the new penalty regime is imposed.
From September 2018 over 100 countries will start to exchange information with HMRC under the Common Reporting Standard and at this point HMRC will have visibility of all overseas income streams of UK taxpayers and for anyone who has not come forward already and corrected any errors in filing, there will be harsher penalties imposed.
Who is affected?
UK taxpayers who have offshore income, including income tax, capital gains or inheritance tax.
The RTC period will end in September 2018. In the period 6th April 2016 to 30th September 2018 a review should be undertaken of all assets to ensure compliance and if any amendments need to be made these would be made under HMRC Worldwide Disclosure Facility (WWD).
How to Correct?
Corrections should be made using HMRC WWD. A notification to HMRC has to be made and a complete disclosure and payment of tax, interest and penalties has to be made within 90 days. The taxpayer has an obligation to self assess his tax affairs including prior years and also to assess his behaviour over this time to determine relevant penalties that may be appropriate.
What should I do next?
We recommend an immediate review of all tax affairs of anyone who has an offshore income and assets. Examples include, but are not limited to:
- Overseas rental income
- Bank interest/dividends from foreign companies or banks
- Stock transactions (sale or dividends from) in an overseas brokerage account
- Income generated from overseas accounts which may be considered tax free in the other jurisdiction, for example Canadian RRSP accounts.
- Benefits from offshore trusts
The review should include a check of the individual’s residency and domicile status as well as a look back over the last 4 years as a minimum, although HMRC can ask to go back and review up to 20 years if they believe the error was deliberate. You should consider any changes to tax laws in recent years and not rely on previous advice, which may not be current or relevant to your situation.
GTN UK can offer a Tax Heath Check service for any individuals concerned about the new changes and who would like to discuss their tax affairs to consider if they should take advantage of the RTC period now.