FAILURE TO CORRECT

Failure to Correct (FTC) is the offshore penalty regime that will apply from 1 October 2018, following on from the Requirement to Correct (RTC) legislation which recently came into effect.

RTC is HMRC’s last attempt to coerce taxpayers with links to offshore assets to review and regularise their historic tax affairs to ensure that they are correct.

It dictates that any entity in the world has an obligation to identify and disclose historic non-disclosure relating to UK Income Tax, Capital Gains Tax and Inheritance Tax.

Any entity that does not ensure that their historic affairs are regularised by 30 September 2018 will be subject to the FTC provisions.  These are draconian, potentially out of proportion to the tax due and will mean:

  • Penalties of up to 300% of the potential lost revenue (minimum 100%),
  • A potential 10% asset-based penalty, and
  • Potential “naming and shaming”, whereby your name, address and details of tax underpaid are published by HMRC. This can be accessed by anyone online.

Furthermore, HMRC have made it clear that they will not hesitate to prosecute individuals where appropriate.

Clearly, the above is designed to panic taxpayers into regularising their affairs if they have not already.  The good news is that you have until 30 September 2018 to make a disclosure to avoid being caught by the FTC provisions.

Given the complexity of the UK tax legislation, we would strongly suggest that all persons with any arrangement which has a UK connection undertake a review of their tax affairs to ensure that they are compliant with historic and current UK tax legislation (both in spirit and in fact) prior to FTC coming into effect next year.

HOW CAN LANCASTER KNOX HELP?

At Lancaster Knox our Tax Investigation specialists are industry recognised and have dealt with hundreds of potentially contentious situations with HMRC over the years.  We are adept at managing interactions with the tax authorities to ensure that the process runs smoothly and that your interests are best protected.

Lancaster Knox will work with you (and your current adviser, if applicable) to undertake a review of your affairs, arrange a UK tax disclosure if necessary prior to the 30 September 2018 deadline and ensure that HMRC do not seek to obtain information they are not entitled to.

If HMRC have already opened an enquiry or commenced an investigation into your affairs, either under COP8 or COP9, then please do get in contact as soon as possible so that we can ensure that the process is managed correctly and in a timely manner from the get-go, that HMRC receive the correct amount of tax and that the your interests are fully protected.