Individuals, companies and trusts are being targeted with reminders to bring their tax affairs up to date before the deadline and possibly seek advice from a professional. Undeclared assets could include savings accounts, debts owed, government securities, and rights or intellectual property.

As part of wider moves against tax evasion, HMRC is bringing together more than 3,200 treaties with over 100 countries. The network, called the common reporting standard, allows these countries to exchange a collection of personal data about taxpayers, including their names, addresses, and capital gains. This data will, according to the agency, ‘significantly enhance HMRC’s ability to detect offshore non-compliance and it is in taxpayers’ interests to correct any non-compliance before that data is received’. The standard will come into effect at the same time as the requirement to correct (RTC) legislation, which creates an obligation for taxpayers with undeclared tax liabilities to disclose the relevant information to HMRC by the end of September.

Requirement to correct is intended to clamp down on the more than 50,000 taxpayers that HMRC believes use schemes to allow them to avoid paying income tax by using loans and overseas trusts. It also applies to UK source income (or proceeds arising from a capital gain) that was moved overseas before 6 April 2017.

Also being targeted are those who have moved to the UK from overseas and still possess assets or income in their original country. For the purposes of the legislation, foreign territories include the Channel Islands, the Isle of Man and the Republic of Ireland.

Bishop Fleming tax partner, Paul Morris, warns that the clock is ticking and that taxpayers who do not inform HMRC before the deadline will face stiff penalties: ‘From 1 October 2018 there will be eye-watering penalties of up to 200% (double the current amount) on any tax not declared, plus asset-geared penalties of a further 10%. There will be extra penalties where assets or funds are hidden to avoid detection. Taxpayers can also be “named and shamed”. But with the right advice, these sanctions can be reduced.’

‘Taxpayers also need to be aware that the UK now exchanges information with over 100 other jurisdictions, so it is aware of foreign assets that have not previously been disclosed. That being the case, it is far better to provide an unprompted disclosure at reduced penalties now rather than being found out after 30 September 2018 and incurring much higher penalties.’

Report by James Bunney