HMRC warns offshorers of tougher penalties

HMRC warns offshorers of tougher penalties

The taxman is warning customers to declare overseas assets quickly before new proposals to allow tougher penalties and longer investigation times kick in.

HMRC said the new proposals, which take effect from 1 October, will give a time limit of 12 years for investigations, compared with four or six years now.

The tax office said the move is because it can take much longer to establish the facts about offshore transactions, particularly if they involve complex offshore structures.

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David Richardson, HMRC director general for customer strategy and tax design,said:“Everyone has to pay their tax and the vast majority of people and businesses already do.

"It’s on their behalf that we are cracking down on offshore tax cheats.”

As well as increased time limits, HMRC has introduced new legislation called the Requirement to Correct which will dramatically increase the penalties for people who have not declared tax or declared the wrong amount of tax on their offshore income and gains.

Under this legislation those with undeclared offshore tax liabilities - relating to income tax, capital gains tax or inheritance tax for the relevant periods - must disclose them to HMRC on or before 30 September 2018.

If they do not, the standard penalty will be 200 per cent of tax liability, while there is a more serious asset-based penalty of up to 25 per cent of assets connected to the failure to disclose.

Those who deliberately moved assets to avoid having details reported to HMRC under international information-sharing agreements are charged an extra 50 per cent on top of the standard penalty.