Offshore matters: requirement to correct certain offshore tax non-compliance: relevant offshore tax non-compliance
Relevant offshore tax non-compliance
Offshore tax non-compliance occurs where tax is owed to HMRC as a result of non-compliance involving either an offshore matter or an offshore transfer at ‘the relevant date’ (see below).
What is an offshore matter?
Tax non-compliance involves an offshore matter if the unpaid tax is charged on or due by reference to
- income arising from a source in a territory outside the UK
assets situated in a territory outside the UK. ‘Assets’ takes its meaning from TCGA92/S21(1) so it covers all forms of property. It includes
- physical assets, such as land and buildings,
- options, debts and incorporeal property generally, and
- currency - note that for these purposes currency includes sterling
- activities carried on wholly or mainly in a territory outside the UK, or
- anything having effect as if it were income, assets or activities of a kind described above.
What is an offshore transfer?
Tax non-compliance involves an offshore transfer if it is not an offshore matter and the income or any part of the income, was either received abroad or was transferred abroad before on or before 5 April 2017.
Capital Gains Tax
Where the tax at stake is capital gains tax, it involves an offshore transfer if the information that should have been given in the tax document relates to the proceeds of the disposal on or by reference to which the tax is charged, or any part of the proceeds
- were received in a territory outside the UK, or
- were transferred on or before 5 April 2017 to a territory outside the UK.
For inheritance tax, the tax non-compliance involves an offshore transfer if it is not an offshore matter and the disposition that gives rise to the transfer of value involves a transfer of assets, and after that disposition, but on or before 5 April 2017, the assets, or any part of the assets, are transferred to a territory outside the UK.
Assets are treated as situated or held in a territory outside the UK if they are so situated or held immediately after the transfer of value by reason of which inheritance tax becomes chargeable.
The relevant date
The RTC only applies if HMRC would have been able to raise an assessment to recover the tax at the relevant date if it had known about the non-compliance at that time.
The relevant date is
- where the tax at stake is income tax or capital gains tax, 6 April 2017
- where the tax at stake is inheritance tax, 17 November 2017, which is the day following the date on which this Act was passed.
The Compliance Handbook contains full details of time limits for Income Tax, and Capital Gains Tax, see CH56100, and Inheritance Tax, see CH56800.
There are different time limits when a person fails to notify chargeability. Special rules also apply when a person dies, see CH54200.
Offshore tax non-compliance
Offshore tax non-compliance for the purposes of RTC involves any of the following
- Failure to notify chargeability - Schedule 41, FA2008.
- Failure to file on time - Schedule 55, FA2009.
- Inaccuracy penalties - Schedule 24, FA2007.
The RTC rule does not apply
- to any capital gain that is payable by a company in respect of non-resident Capital Gains Tax (NRCGT)
- to any tax non-compliance to the extent that it has already been put right.
When a penalty is payable
A penalty is payable by a person who has any relevant offshore tax non-compliance to correct at the end of the 2016-17 tax year, and fails to correct the non-compliance on or before 30 September 2018.
The RTC rule relates to any loss of the following subsisting at 5 April 2017
- income tax,
- capital gains tax (but not CGT payable by non-resident companies that are NRCGT gains),
- inheritance tax (IHT).
Please note that only offshore tax non-compliance committed before 6 April 2017 falls within the RTC, see CH123150.