Requirement to correct

On 5 December 2016, HMRC published draft requirement to correct (RTC) legislation. Under the proposed legislation, due to take effect from 6 April 2017, those who do not put their offshore tax affairs in order by 30 September 2018 will be subject to significantly increased penalties.

The period from 6 April 2017 to 30 September 2018 is known as the RTC window.

Do I have something to correct?

Taxpayers must be confident their affairs are in order. Those who are unsure should check the position. If taxpayers know their return(s) contains inaccuracies, they will need to rectify these. 

HMRC has acknowledged those with offshore interests have the most complex tax affairs. If taxpayers are unsure if there may be a problem with their return, or whether they should have notified HMRC of a potential liability, HMRC expects them to seek professional advice in order to be certain. The consequences of being wrong or failing to check are severe. 

Under the current regime, an innocent error that isn’t attributable to carelessness attracts no penalty - the taxpayer simply pays the tax that would have been due absent the error (together with interest for late payment). Even a careless error (ie if the taxpayer has not taken reasonable care) would only attract a maximum penalty of 30 per cent of the under-declared tax.

Under the RTC legislation, anyone whose return contains an error that is not corrected, irrespective of why it was made, is liable to a maximum penalty of 200 per cent of the under-declared tax. A further penalty of up to 10 per cent of the value of relevant offshore assets and public naming and shaming may apply in more serious cases.

How can RSM help?

RSM’s tax risk and investigations management team is experienced in advising on and managing HMRC disclosures and investigations to secure the best possible outcome. Equally RSM’s private client tax team has a wealth of experience in advising clients in relation to complex offshore arrangements, including how these should be structured and managed to mitigate UK as well as worldwide tax exposure. 

The depth of experience in our combined teams can support clients in addressing the potential risk presented by the requirement to correct legislation, including reviewing existing arrangements to:

  • provide an independent expert technical view as to their effectiveness;
  • advise on their robustness and ways in which they can be improved;
  • advise on how best to address any issues; and
  • advise on how best to disclose a required correction and manage the process with HMRC. 

If you would like to discuss any concerns you may have and how these may be resolved to ensure compliance and provide peace of mind going forward, please contact one of the individuals listed or your existing RSM contact.

The requirement to correct

Offshore tax matters. Act now or face stringent new penalties.

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