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HMRC internal manual

Compliance Handbook

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HM Revenue & Customs
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Penalties for inaccuracies: calculating the penalty: penalty reductions for disclosure: maximum and minimum penalties for inaccuracy involving an offshore matter: offshore asset move penalties

This guidance covers penalties under Schedule 21 FA 2015 known as offshore asset move penalties. These penalties are different penalties from those under schedule 24 FA 2007, but apply if there is an underlying penalty under Schedule 24. There are similar provisions in relation to Schedule 55 FA 2009 and Schedule 41 FA 2008 penalties, see CH62291 and CH73218 respectively.

If you think that a person is liable to an offshore asset move penalty under Schedule 21 FA 2015 you must first discuss the case with your manager and then make a report to Central Policy, Tax Administration Advice (TAA).

A person may be liable to an offshore asset move penalty if all the following conditions apply.

  • The person is liable to a penalty for an inaccuracy under Schedule 24 Finance Act 2007 - this is the underlying penalty.
  • The tax at stake in relation to the underlying penalty is income tax, capital gains tax or inheritance tax.
  • There is a relevant offshore asset move connected with the inaccuracy that led to the underlying penalty. The relevant offshore asset move occurred after 26 March 2015.
  • The relevant offshore asset move occurred after the relevant time.
  • The main purpose or one of the main purposes of moving the asset to another territory was to prevent or delay discovery by HMRC of the inaccuracy that led to the underlying penalty.

Amount of the penalty

The offshore asset move penalty is 50 per cent of the amount of the underlying penalty and is in addition to that underlying penalty.

Relevant offshore asset move

A relevant offshore asset move occurs if an asset or a person who holds an asset moves from a specified to a non-specified territory, or if there is a change in the ownership arrangements of an asset which results in the beneficial owner prior to the move remaining the beneficial owner afterwards.

Any second or later asset purchased with proceeds of sale from the original asset is treated as the original asset when determining whether a relevant offshore asset move has occurred.

The specified territories are set out in The Offshore Asset Moves (Specified Territories) Regulations 2015 (S.I. 2015/866). Any territories not specified in the Statutory Instrument are non-specified territories.

Relevant time

For Income Tax and Capital Gains tax the relevant time is the beginning of the tax year in respect of which a penalty was charged for an inaccuracy.

For Inheritance Tax, the relevant time is the time when the liability for the tax at stake first arises.

Legislation

The legislation is in Schedule 21FA 2015.

Commencement date

Schedule 21 FA 2015 applies to relevant asset moves that take place after 26 March 2015.

Income tax and capital gains tax

Schedule 24 Finance Act 2007 (inaccuracy) penalty: the relevant time is the start of the tax year in respect of which a penalty was charged for an inaccuracy

Inheritance Tax

Schedule 24 Finance Act 2007 (inaccuracy) penalty: the relevant time is the time when the liability to the tax first arises.

Action to take 

If you think that a person is liable to an offshore asset move penalty under Schedule 21 FA 2015, you must first discuss the case with your manager and then make a report to Central Policy, Tax Administration Advice (TAA). If TAA agrees that the person is liable to the penalty they will tell you what action to take.

You must not take action in relation to a penalty under Schedule 21 FA 2015 without referring the case to TAA.

Assessing or settling the penalty - only if you have permission from TAA

Once we have established that a person is liable to a penalty for an offshore asset move we will normally assess the penalty. Alternatively, the person can make us an offer to settle the tax, interest and penalties by contract settlement, see CH411050.

The penalty assessment is enforceable in the same way as an assessment ‘to tax’. This means that the rules that apply to the tax or duty that the penalty relates to also apply to the penalty assessment.

Before you assess a penalty or penalties, following TAA advice, you must decide

  • the amount of the penalty or penalties
  • which tax period the penalty or penalties relates to.

When have permission from TAA to assess a penalty or penalties you must

  • notify the person about the penalty or penalties you are assessing in a penalty notice (NPPS2), and
  • state in the notice the specific tax period in respect of which the penalty or penalties are being assessed. This will be the tax period in which the offshore asset move takes place.

The penalty notice will tell the person what they owe, when they must pay it and their appeal rights.

Although more than one penalty can be included in a notice, you must include a separate entry in the notice in relation to each one.

If you intend to include the penalty in a contract settlement, following TAA advice, you will still need to tell the person how much the penalty is but the contract will stand in place of the assessment. You will find guidance on contract settlements at EM6000 for direct tax and IHTM36221 for Inheritance Tax. The time limit for assessing the offshore asset move penalty is the same as for the original penalty.

If the underlying penalty is amended, the offshore asset move penalty must be amended at the same time to ensure it remains at 50 per cent of the amount of the underlying penalty.

Appeals

A person can appeal against our decision to impose an offshore asset move penalty.

If the appeal cannot be settled by agreement (with or without a review) the person may notify their appeal to the tribunal, see the Appeals, Reviews and Tribunals Guide (ARTG).

The tribunal may affirm or cancel our decision.