HMRC extends Requirement to Correct deadline (in a way)

Perhaps the prospect of returning from summer holidays to face a mountain of disclosures was not attractive to the HMRC inspectors. In their latest update, HMRC have clarified that they are relaxing the penalty position during the introductory period of the RTC rules.

Under the rules (as clarified), where there is non-compliance relating to offshore assets which arose on or before 5 April 2017, it will not be necessary for the non-compliance to be dealt with fully by 30 September 2018. Instead, HMRC require a “commitment”, by 30 September 2018, that the non-compliance will be dealt with via one of three routes:

1. A disclosure under the Worldwide Disclosure Facility (WDF);
   
   
2. A disclosure under the Contractual Disclosure Facility (CDF); or
   
   
3. Where an enquiry is already open, by informing the person conducting it that a disclosure of offshore non-compliance will be made.

Once the commitment has been made any penalties will be assessed under the existing regime, rather than the (more draconian) RTC rules, provided that the full disclosure is submitted by a revised deadline (which will usually be 60 to 90 days after HMRC acknowledges receipt, though these can be extended in certain circumstances).

There are key differences between the WDF and CDF options which require careful consideration; choosing the wrong route could result in unnecessary penalties and potential exposure to criminal charges.

Finally, if there is uncertainty as to whether a disclosure is required it may be possible to make a disclosure on a without prejudice basis (and this may be prudent given the increasing complexity of the UK tax code).

When do I need to start thinking about this?

As soon as possible. As we explained in the last edition of the trustee survival guide, trustees need to be proactive in identifying possible non-compliance to ensure that they are on the right side of the new rules.

Between now and 30 September 2018

• Start thinking about whether any of your trusts, or the beneficiaries of those trusts, might have outstanding UK tax issues relating to offshore assets.
  
  
• If in any doubt, get a “health check” from an independent legal adviser.
  
  
• If the “health check” identifies outstanding UK tax issues, take legal advice (or encourage your beneficiaries to take legal advice) to understand the disclosure options and determine the best way forward.
  
  
• Once you have a clear picture of the issues and a game plan for how they should be resolved, the person liable for the tax needs to notify HMRC by 30 September 2018 of their intention to disclose via one of HMRC’s recognised routes.

After 30 September 2018

• Work with your legal advisers and accountants to ensure that the disclosure is complete, accurate and submitted within the deadline given by HMRC.

If you require further information on anything covered in this briefing please contact Alexis Hille or Andrew Watters, or your usual contact at the firm on 020 3375 7000.

This publication is a general summary of the law. It should not replace legal advice tailored to your specific circumstances.

© Farrer & Co LLP, July 2018