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Article:

The UK’s Requirement to Correct

03 December 2018

As a result of tax transparency (the Common Reporting Standard / beneficial ownership registers) HMRC is more likely than ever to ‘spot’ non-compliance – be it as a result of genuine mistakes, carelessness or deliberate action. 

The Requirement to Correct (‘RTC’) is a statutory obligation for taxpayers with overseas assets to correct any issues with their historic UK tax position.  Those who fail to do so face punitive financial penalties and other severe sanctions.

The RTC applies to any person with a potential undeclared UK income tax, capital gains tax and/or inheritance tax liability, i.e. individuals, partnerships, trustees or non-resident landlord companies.

View HMRC's latest guidance on the Requirement to Correct here.
 

What was the deadline?

The RTC period started on 6 April 2017.  Taxpayers were expected to take steps to correct their UK tax position by 30 September 2018.
 

What happens if an error was not corrected by 30 September 2018?

After 30 September 2018, the ‘Failure to Correct’ (‘FTC’) regime began. Hear from our tax dispute resolution team on what we can expect going forward:

The FTC regime include punitive penalties, including:

  • a tax geared penalty of between 100% and 200% of the tax not corrected 
  • a potential asset based penalty of up to 10% of the value of the relevant asset where the tax at stake is over £25,000 in any tax year
  • potential “naming and shaming” where over £25,000 of tax per investigation is involved
  • a potential additional penalty of 50% of the amount of the standard penalty, if HMRC could show that assets or funds had been moved to attempt to avoid the RTC

Anyone who failed to correct their position despite knowing that they should do so may also face

  • a potential asset based penalty of up to 10% of the value of the relevant asset where the tax at stake is over £25,000 in any tax year
  • potential “naming and shaming” where over £25,000 of tax per investigation is involved

No penalty will be chargeable where the taxpayer has a reasonable excuse for failing to correct the position.  A ‘health check’ of a taxpayer’s position during the RTC period is likely to provide a strong, defence.
 

How can BDO help?

We are able to advise on the next steps following the passing of the deadline and the commencement of the Failure to Correct period. 

Members of BDO’s tax dispute resolution team have written a number of articles and guidance on the RTC.

  • Partner Dawn Register has written a comprehensive article focusing on the UK’s Requirement to Correct, published in the Bloomberg BNA Tax Planning International Review journal.

    Dawn explains what the RTC is and how it affects taxpayers. Penalties for non-compliance will increase significantly, even where there is no deliberate intent behind the mistake made. 

    Download the full article below or read online at www.bna.com
     
  • Helen Adams, Principal within the team, and Dawn Register wrote an article on Requirement to Correct in the September 2017 issue of Tax Advisor magazine.  Download the full article below.

All articles reproduced with kind permission from the original publishers