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HMRC internal manual

Compliance Handbook

Offshore matters: asset-based penalties: identification and valuation of assets: examples of asset-based income tax

Asset-based penalties are charged in respect of income tax and assets listed in the table at Paragraph 13 Schedule 22 FA 2016, see CH122110.

An asset that does not generate income under any of the provisions listed in that table will not give rise to asset-based income tax.

Example 1

John runs a sales business in the UK. He moves money from these sales out of the UK and invests it in an offshore bank account. He fails to declare the interest from that account on his self-assessment return. This inaccuracy (the omitted interest) involves an offshore matter and the asset (capital moved to the offshore bank account) gives rise to an asset-based income tax.

The income tax is charged under Chapters 2 and 2A of Part 4 ITTOIA 2005. The asset is the asset that generates the interest chargeable to income tax.

Example 2

Peter is resident in the UK as a self-employed builder. Peter also owns a holiday home overseas which he advertises on various holiday websites and rents out to holidaymakers. Peter deliberately omits to declare this rental income when he submits his relevant year’s self-assessment tax return. Peter incurs a penalty under Schedule 24 2007 for the submission of an inaccurate document. This inaccuracy (the omitted rental income) involves an offshore matter and the asset (holiday home) gives rise to asset-based income tax.

The amount of the asset-based penalty is the lower of

  • 10% of the value of the asset, or
  • 10 times the offshore PLR

This is subject to any reductions for disclosure and co-operation.

Also remember that the offshore PLR must exceed £25,000 before any asset-based penalty can be charged.

Example 3

Sarah is resident in the UK but runs a sales business offshore. She suppresses income from this business when submitting her self-assessment tax return. Sarah is charged a penalty for inaccuracy under S24 FA 2007, however, this income is not generated from an asset so no asset-based income tax is generated.