HM Revenue and Customs (HMRC) is urging UK taxpayers to declare foreign income or profits on offshore assets to avoid higher penalties.
New legislation called 'requirement to correct' requires UK taxpayers to notify HMRC about any offshore tax liabilities relating to UK income tax, capital gains tax, or inheritance tax.
However, some UK taxpayers may not realise they have a requirement to declare their overseas financial interests before 30 September.
Under the rules, actions like renting out a property abroad, transferring income and assets from one country to another, or even renting out a UK property when living abroad could mean taxpayers face a tax bill in the UK.
Other examples of offshore assets include art, bank and other savings accounts, boats, life assurance policies and pensions.
The new failure to correct penalty is likely to be much higher than existing penalties, with a minimum penalty of 100 per cent of the tax involved.
Mel Stride, MP and financial secretary to the Treasury, said: "Since 2010 we have secured over £2.8bn 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.
"This new measure will place higher penalties on those who do not contact HMRC and ensure their offshore tax liabilities are correct. I urge anyone affected to get in touch with HMRC now."
From 1 October more than 100 countries, including the UK, will be able to exchange data on financial accounts under the Common Reporting Standard (CRS).
CRS data will 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.
More than 17,000 people have already contacted HMRC to notify the department about tax due from sources of foreign income, such as their holiday homes and overseas properties.
Once a customer has notified HMRC by 30 September of their intention to make a declaration, they will then have 90 days to make the full disclosure and pay any tax owed.
If anyone is unsure, HMRC recommends they seek advice from a professional tax adviser or agent.
Scott Gallagher, IFA and director of Leicester-based Rowley Turton, said: "The HMRC are correct in highlighting this issue.
"Whilst tax matters can be very complex, ignorance is no defence. Consequently, anyone with slightly complicated financial situations should obtain professional advice as a matter of course."
This comes as statistics released by HMRC show non-doms paid almost £9.4bn in tax in 2016/17, up £130m on the previous year’s total.
This is the highest on record since figures started to be recorded in 2007/08, according to accounting, tax and advisory firm Blick Rothenberg.
Paul Haywood-Schiefer, a manager at the firm, said: "Non-doms and the tax they pay play an important role in this country’s finances.
"The regime is seen by many as outdated, but along with initiatives like business investment relief, provides the UK with a great opportunity for inward investment, especially as many non-doms are flexible when it comes to where they live.
"The rules have changed now to include a deemed domicile rule for long term residents, which will certainly have been the cause for much of the drop in the number of non-doms living in the UK post 2015/16, and I’d expect there may be a further drop in 2017/18 when the figures are announced next year."
Gemma Siddle, chartered financial planner at Eldon Financial Planning, said: "It’s vital to be aware of your tax position to ensure you comply with rules and reporting.
"Simply burying your head in the sand and saying 'I thought' is not acceptable to HMRC or most overseas tax authorities.
"Taking personal responsibility for reporting is paramount to ensure you don’t breach any rules. It’s great that HMRC is offering this reminder and those who aren’t sure should take action now."
aamina.zafar@ft.com
