The announcement means that the assessment time limit for offshore tax non-compliance for income tax, capital gains tax (CGT) and inheritance tax (IHT) will increase to 12 years from next April. In cases where there is deliberate behaviour, the time limit remains set at 20 years. Following consultation in summer 2018, the legislation clarifies that the extended time limits will apply unless international agreements mean HMRC already has the information needed to assess the tax due.

The legislation will have effect from April 2019. It will apply to the four years still in date at 6 April 2019 together with the two earlier years (in cases where there has been careless behaviour). The new measure will not extend time limits for years that were out of date for assessment at the date of implementation. In other words, the measure will not apply to years that had already become ‘out of date’ so that they are brought back ‘in date’ again.

These amendments will have effect in relation to income tax and CGT assessments from 2013 to 2014 in cases where the loss of tax is brought about carelessly, and from 2015 to 2016, and subsequent years, for other cases (where not already subject to the 20 year time limit). They will apply for IHT to chargeable transfers taking place on or after 1 April 2013 where the loss of tax is brought about carelessly, and 1 April 2015 for other cases not subject to a longer time limit. The amendments will have effect when Finance Bill 2018-19 receives Royal Assent.

Following the consultation, HMRC has clarified that the extension of time limits rules will not apply where HMRC receives accurate common reporting standard (CRS) information and is able to raise an assessment without having to investigate further.

Fiona Fernie, a partner in tax dispute resolution at Blick Rothenberg said: ‘It is disappointing that the government is extending the time limits for assessment of offshore tax non-compliance to this extent for those taxpayers where the non-compliance is not the result of deliberate evasion.

‘It puts a huge burden on taxpayers in terms of record keeping and encourages inefficiencies in HMRC's investigation practices.

‘A campaign which educates taxpayers about their responsibilities in relation to their offshore assets, combined with a continuing clamp down on those who deliberately evade tax on offshore income and gains may be a better use of HMRC's resources.’

Other key measures set out in the Budget include:

• the introduction of legislation in Finance Bill 2019-20 to allow HMRC to make directors and other persons involved in tax avoidance, evasion or phoenixism jointly and severally liable for company tax liabilities, where there is a risk that the company may deliberately enter insolvency. This will have effect from Royal Assent of Finance Bill 2019-20.
• the introduction of legislation in Finance Bill 2019-20 to make minor procedural and technical changes to the General Anti Abuse Rule (GAAR). The changes will come into effect following Royal Assent.

In addition the government will publish an updated offshore tax compliance strategy which will update the previous strategy published in 2014.

In 2021/22 the tax on CGT is expected to bring in an additional £5m in tax, doubling to £10m the following year.

Report by Pat Sweet