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Article:

I have money offshore but I’ve never told HMRC. Will HMRC ever know?

25 June 2019

The short answer to this question is ‘yes, probably’.  HMRC receives information from other countries’ banks about accounts held by people based in the UK. This information arrives annually as a result of the ‘Common Reporting Standard’ arrangements between over 100 different tax authorities worldwide.  As a result HMRC is likely to know about offshore bank accounts (including any interest earnt) and perhaps about offshore trusts.

HMRC is matching the data it gets to the information it holds on individual UK taxpayers. If it realises that someone has not declared interest, capital gains or profits earnt abroad then it will at the very least send a letter asking the person to check their UK tax affairs and correct any mistakes. In many cases HMRC will open a formal investigation. There may be a simple, technical answer that means no corrections are needed. Otherwise, the mistake will need to be corrected.  

HMRC will charge the tax that should have been paid in the past, subject to legal limits on how many years can be assessed. Broadly those limits are 4, 6 or 20 years from the end of the tax year in question depending on why the mistake occurred. The 4 and 6 year limits are being extended to 12 years in some cases. Late payment interest is charged from the date the tax was due for payment until the date it is finally paid.

In addition, HMRC can impose penalties calculated as a percentage of the tax liability. For offshore income, activities, transfers or assets giving rise to the UK tax then the penalties may be up to 200% of the tax. The minimum penalty for those who failed to meet the Requirement to Correct (RTC) without a reasonable excuse is 150% of the tax; reduced to 100% for voluntary disclosures. Asset-based penalties and penalties for moving assets to keep them hidden from HMRC may also be charged.

Regardless of whether a person failed to correct their UK tax in relation to an overseas asset, income or profits by September 2018, HMRC will be more benevolent if they are told about the mistake voluntarily, before they find out. They will not publish a person’s details for failing to correct their UK tax position if a voluntary disclosure is made and the minimum (100%) penalty is charged. Importantly a voluntary disclosure will bring your UK tax affairs up to date so that you have peace of mind.

Making a voluntary disclosure can be done alone, but it is better to engage an experienced adviser to guide you through the process. Read our earlier blog that tells you all you need to know about voluntary disclosures.

Working out how much tax is due, how many years’ tax must be paid and what the penalties may be is not straightforward. Our specialist advisers can help you through every stage until agreement with HMRC is reached, building in time to pay if necessary.