The Requirement to Correct (RtC) legislation was a call to action from HMRC, targeting UK taxpayers who had undeclared offshore financial interests. This initiative was introduced as part of the government's efforts to clamp down on tax evasion and ensure tax compliance. Taxpayers were given until the 30th September 2018 deadline to disclose any offshore tax liabilities (including Income Tax, Capital Gains Tax, and Inheritance Tax) related to foreign income or assets that hadn't previously been reported to HMRC.
Penalties for Failing to Correct:Failing to disclose the required information by the deadline triggered the Failure to Correct (FtC) regime, bringing about hefty penalties. The penalties under FtC were significantly more severe than those that had applied previously, with a starting point of 100% of the tax due. In many cases, this could escalate to 200% of the undeclared tax. Additionally, taxpayers could face an asset-based penalty of up to 10% of the related asset's value if the tax underpaid exceeded £25,000 in any tax year. In severe cases, there was also the risk of "naming and shaming" individuals who failed to correct their offshore tax affairs.
Rationale Behind RtC and FtC:The RtC legislation was introduced to encourage taxpayers to come forward and correct any inconsistencies or omissions in their tax affairs voluntarily. This was particularly pertinent in the context of increased global information sharing agreements, such as the Common Reporting Standard (CRS), which made it easier for tax authorities worldwide to exchange information about individuals' financial accounts and assets held offshore.
The implementation of RtC and FtC reflected HMRC's more stringent approach to offshore tax evasion and non-compliance. It highlighted the importance of taxpayers ensuring they are fully compliant with their tax obligations, particularly regarding offshore interests.
If you missed the RtC deadline and are concerned about potential penalties under FtC, it's advisable to seek professional tax advice as soon as possible. There may still be options to regularize your tax affairs, but prompt action is essential to mitigate potential penalties and other consequences.
