As of 1 October, the new Requirement to Correct (RTC) rules are upon us. Previously, under HMRC Offshore Disclosure Facilities, taxpayers had been encouraged to come clean with an offer of lower penalties than would have been incurred if “the error” had been discovered by HMRC.

All that has now changed. Failure to Correct rules, introduced alongside RTC, leave non-compliant taxpayers facing penalties of up to 200% of the resultant tax liability – or even more. Where the tax involved exceeds £25,000 per tax year, an additional penalty of up to 10% of the value of the asset concerned may be charged.

RTC only applies if HMRC is able to raise an assessment to recover the tax unpaid on 6 April 2017. Normal assessing rules apply to decide whether HMRC is able to raise such an assessment.

The most common reasons for failing to declare offshore tax are in relation to foreign property and holiday homes, investment income, and moving money into the UK from abroad.

HMRC have said the following:

“Offshore non-compliance occurs when there is tax owed to HMRC as a result of tax non-compliance and that non-compliance involves either an offshore matter or an offshore transfer.

The tax non-compliance involves an offshore matter if the unpaid tax is charged on or by reference to:

  • income arising from a source in a territory outside the UK
  • assets situated in a territory outside the UK
  • activities carried on wholly or mainly in a territory outside the UK, or
  • anything having effect as if it were income, assets or activities of a kind described above.

The tax non-compliance involves an offshore transfer if it is not an offshore matter, but the income (or sale proceeds in the case of a capital gain), or any part of the income, was either received abroad or was transferred abroad before 6 April 2017.

For inheritance tax, the tax non-compliance involves an offshore transfer if it is not an offshore matter, but the disposition that gives rise to the transfer of value involves a transfer of assets, and after that disposition, but on or before 5 April 2017, the assets, or any part of the assets, are transferred to a territory outside the UK.

In all cases, references to the income, proceeds or assets transferred includes any assets derived from or representing the income, proceeds or assets.


If the non-compliance meets these definitions, the RTC rule applies and failure to correct the position will result in the new tougher FTC penalties.”

Mel Stride, The Financial Secretary said, “Since 2010 we have secured over £2.8 billion for our vital public services by tackling offshore tax evaders, and we will continue to relentlessly crack down on those not playing by the rules.”

RTC is supported by the Common Reporting Standard (CRS), an international legal framework permitting the automatic exchange of information, between different country’s tax authorities, regarding financial accounts and investments held by non-residents, in order to help stop tax evasion. CRS came into force in the UK in 2016. In excess of one hundred countries are already signed up to CRS and are starting to share information. It has already significantly increased HMRC’s ability to detect UK taxpayers’ overseas non-compliance.

If you would like to discuss this, or any other matter further, then please contact us.