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HMRC internal manual

Compliance Handbook

Offshore matters: asset-based penalties: overview

This guidance covers penalties under Schedule 22 FA2016 known as the ‘Asset-based penalty for offshore inaccuracies and failures’. These penalties are different from those under Schedule 21 FA2015 known as ‘Offshore asset move penalties’, which are explained at CH119000.

Aims of the asset-based penalty

The strategy for tackling offshore tax evasion is set out in HMRC’s ‘No Safe Havens’ document. This states that HMRC will take tough action against evaders and those who help others to evade tax.

In the March 2015 budget the Government announced its intention to legislate tougher financial penalties for offshore evaders, including a penalty based on the value of the asset on which tax was evaded, as well as wider public naming of offshore evaders. 

The asset-based penalty is an additional penalty to be charged in cases of serious non-compliance involving an offshore matter or offshore transfer.

The aim of this penalty is to deter those who use offshore jurisdictions with the objective of evading their UK tax liability.

Taxes an asset-based penalty applies to

Asset-based penalties apply to Income Tax, Capital Gains Tax and Inheritance Tax.

Commencement dates for asset-based penalties

This act came into force on 1 April 2017.

Circumstances in which an asset-based penalty is chargeable

The asset-based penalty will apply where all of the following conditions are met:

  • The person gives an inaccurate return, fails to notify a charge to tax, or fails to make a return on time.
  • The inaccuracy or failure relates to an offshore matter or offshore transfer.
  • The behaviour that led to the failure or inaccuracy is deliberate (whether concealed or not).
  • The person has been charged a penalty in respect of that inaccuracy or failure under:

    • Schedule 24 FA 2007 paragraph 1 - Inaccuracy in taxpayer’s document.
    • Schedule 41 FA 2008 paragraph 1 - Failure to notify.
    • Schedule 55 FA 2009 paragraph 6 - Penalty for failure to make a return more than 12 months after the filing date.
  • The income, gain or transfer of value that relates to the inaccuracy has a clear link to the underlying asset.
  • The potential lost revenue threshold in relation to the offshore matter exceeds £25,000 in a tax year.

Action in enquiring

You must tell the person about their rights under Article 6 of the ECHR by issuing the HRA message and factsheet as soon as you identify there is something wrong that gives you an evidence based reason to believe that a penalty may be due, see CH300500 and CH300900. You must tell the person about their rights before you ask them any questions about how or why it is wrong, or discuss penalties.

More guidance

For more detailed guidance on

  • circumstances in which an asset-based penalty is chargeable, see CH122020 
  • definition of terms used about asset-based penalties, see CH122100
  • identification and valuation of assets, see CH122300
  • calculating the penalty due, including any reduction, see CH122500
  • assessing the penalty, see CH122700, and
  • dealing with appeals against the penalty, see CH122800.

There is also guidance on miscellaneous issues that may affect the penalty at CH84500.