From the United Kingdom: Requirement To Correct – How to Avoid Punitive Penalties?
The UK has introduced a new way to enforce the collection of tax from all taxpayers with UK tax liabilities - the Requirement To Correct (RTC). The RTC imposes an obligation on anyone who has under-declared UK tax liabilities to make a disclosure to HM Revenue & Customs (HMRC), the UK tax authority.
Failure to disclose by September 30, 2018, will result in punitive penalties. The standard penalty is between 100% and 200% of the tax owed. In addition, HMRC may:
- Charge an additional penalty of 50% of the standard penalty, if HMRC can show that funds have been moved outside the UK to avoid the RTC.
- Charge an asset-based penalty of up to 10% of the relevant asset where the tax liability is over £25,000 in any tax year.
- Name and shame anyone who owes more than £25,000 of tax.
Penalties may be avoided where the taxpayer engages an independent UK tax advisor to perform a tax review and either help the taxpayer meet his or her obligations, or provide evidence that the taxpayer took reasonable care. For this purpose, it is insufficient to get a tax review from the original advisor who helped set up a non-UK structure.
The RTC applies to individuals, partnerships, trustees or non-resident landlord companies. In particular, the following persons should consider obtaining a tax review:
- Anyone receiving UK rental income;
- Individuals who live in the UK or regularly visit the UK;
- Trustees holding UK assets;
- Trustees holding companies or partnerships which hold UK real estate, and
- Trusts settled by a UK domiciled individual.
We can help. We assist clients in determining whether they have a current or historic UK tax obligation. Where necessary we can assist with disclosing historic obligations to HMRC whilst minimizing the client’s overall liability.