CH53520 - Assessing Time Limits: Extended time limits: 12 year time limit for offshore matters and offshore transfers: Definition of an offshore matter
The 12 year time limit only applies for income tax, capital gains tax, and inheritance tax involving offshore matters or offshore transfers.
Income tax and capital gains tax
Lost income tax or capital gains tax involves an offshore matter if it is charged on or by reference to
- Income arising from a source in a territory outside the UK. For example, the person may have an interest-bearing overseas bank account.
- Assets situated or held in a territory outside the UK. For example, the person may own or dispose of land or buildings overseas.
‘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.
- Income or assets received in a territory outside the UK.
- Activities carried on wholly or mainly in a territory outside the UK. For example, the person may have a trade, or a branch of a trade, overseas.
- Anything having effect as if it were income, assets or activities of a kind described above.
Inheritance tax
Lost tax involves an offshore matter if it is charged on or by reference to a property which is situated or held in a territory outside the UK at, or immediately after, the time of the chargeable transfer.
Example of an offshore matter involving non-domicile person on remittance basis
Mr T is a non-domiciled individual on the remittance basis who fails to understand the rules. He has a single trade as a structural engineer which is mainly carried on in the UK and partly overseas. The fees for overseas work he has paid into a foreign account and Mr T thinks they are not taxable as not remitted. In fact there is only one source of income – the trade which is largely carried on in the UK and is taxable.
This is an offshore matter and incorrect returns have been made. HMRC opens an enquiry into the taxpayer’s latest return and realise that the income on foreign work has not been declared for many years. Mr T has not kept records of that work, as he thought it was not taxable, so HMRC needs information from abroad to calculate the tax due. This involves requesting information from a number of foreign jurisdictions covering various bank accounts over quite a few years.
Until HMRC receives that information it does not have the full picture and cannot make properly informed assessments on Mr T.
The 12 year offshore time limit applies to Mr T’s fees from overseas activities.
There is further guidance on offshore matters in CH112200.
Please note that when considering the 12 year offshore time limit, what is considered as an ‘offshore matter’ and ‘offshore transfer’ differs from other legislation in the Taxes Acts. For example income or assets received in a territory outside the UK is considered to be an offshore matter for the extended time limits but is an offshore transfer for penalties under FA07/Sch24/Para4A.