CH53550 - Assessing Time Limits: Extended time limits: 12 year time limit for offshore matters and offshore transfers: Relevant overseas information
The 12 year time limit only applies for income tax, capital gains tax, and inheritance tax involving offshore matters or offshore transfers.
The 12 year time limit will not apply if HMRC received relevant overseas information
- which reasonably enables HMRC to become aware of and assess the lost tax before the normal time limits expire, and
- it is reasonable to expect HMRC to assess the lost tax before the normal time limits expire.
For income tax, capital gains tax and inheritance tax ‘relevant overseas information’ is any information received by HMRC from an authority in a territory outside the United Kingdom under
- any tax provision of EU law, or
- agreement between the United Kingdom and any territory or territories outside the UK.
Relevant information will include, for example, that received under the Common Reporting Standard (CRS) and under exchange of information articles included in tax treaties.
(This content has been withheld because of exemptions in the Freedom of Information Act 2000)
Example 1 - Where relevant overseas information is received but HMRC fails to act on this
Mr K is a higher rate taxpayer who has filed a tax return every year since 2020. In 2031, data received from another jurisdiction shows an offshore bank account in Jersey with a balance of £50,000 at 31 December 2030 and interest of £500.
Mr K declared income from other offshore bank accounts in the years up to and including 2029-30 and 2030-31 but did not declare any interest income from Jersey.
HMRC subsequently find that relevant overseas information was also received for the 6 previous years showing the account and interest received. The information was accurate, identified Mr K precisely and HMRC agreed that Mr K had taken reasonable care. HMRC failed to tie up the relevant overseas information with Mr K’s returns. In these circumstances the exclusion in TMA70/S36A(7) applies and HMRC is restricted to assessing 4 years.
Example 2 - An offshore matter where HMRC could not reasonably have been expected to be aware of a tax loss from the data held. Common Reporting Standard information initially triggers no tax risk but this isn’t the full picture
HMRC receives two CRS reports showing that Ms Z had offshore bank account interest of £5,500. HMRC checks Ms Z’s tax return, which shows £5,500 interest, so everything appears to match. No enquiry is opened into that return.
HMRC discovers 8 years later that Ms Z actually received total overseas interest of £7,500 (£5,500 CRS interest and £2,000 non-CRS interest). HMRC opens an enquiry and Ms Z explains she made a mistake when completing her tax return. In addition to the £5,500 interest from the CRS bank account Ms Z now agrees that she also received £2,000 bank interest from a separate offshore bank account that was not reported through CRS.
Ms Z accepts that she under-declared her offshore income by £2,000 in her tax return 8 years ago. The tax is outside the 4 and 6 year assessing time limits. In these circumstances HMRC can make an assessment under the offshore time limit. The rule, at TMA70/s36A(7), would not apply because HMRC received some but insufficient relevant CRS data, and could not reasonably have been expected to become aware of the lost tax from that data alone.
Example 3 - An offshore matter where HMRC has information about non-compliance, but this does not meet the definition of “relevant overseas information” and so does not prevent the use of the 12-year extended time limit
Mr D was subject to a compliance check for the tax year 2023/24. During the enquiry Mr D informed HMRC he had received rental income from a property in France into a UK bank account. Mr D had not previously disclosed this information as he had paid tax in France. This was therefore offshore non-compliance through a failure to take reasonable care. Mr D provided HMRC all information in 2028, before the time limit that would otherwise apply for making an assessment. Mr D’s agent argued that the enquiry should only cover six years because HMRC now had the information and subsection (7) of section 36A should apply. However, the information does not constitute “relevant overseas information” as the information was not provided by an authority in a territory outside the UK (as required by the definition in subsection (8)). Therefore, even if HMRC fail to act within the time limit because the information provided does not constitute “relevant overseas information” then an assessment under s36A, using the 12-year extended time limits, is still possible.