Requirement to Correct RTC
It is the new legal obligation for those taxpayers impacted to correct any issue in relation to their ‘offshore matters’ that has given rise to a UK tax liability.
An “offshore matter” includes any connection to income, assets, activities or transfers involving territories outside the UK.
RTC is the disclosure of offshore matter or offshore transfer committed on or before 5 April 2017 and the correction of the outstanding offshore tax non-compliance on or before 30 September 2018.
All tax liabilities should be brought up to date, more specifically: Income Tax, Capital Gains Tax (including Non-residents CGT) and Inheritance Tax.
The failure to correct FTC offshore tax liabilities will be penalised, not the original behaviour which led to the tax liability.
Consequently, FTC penalties could apply to those who are found to have tax liabilities which are due to careless or deliberate behaviour, or even for those who took reasonable care.
Penalties will start at 200% of the tax liability (can be reduced but no lower than 100%).
An additional penalty of up to 10% of the value of the relevant asset can be applied as well as the reputational damage of being ‘named and shamed’ on a public website.
The only defence to FTC is that someone had a reasonable excuse why they did not correct before 30 September 2018.
The provisions in the legislation specifically disqualifies tax advice received in certain situations.
What periods need to be corrected?
This depends on specific circumstances. The relevant years to be corrected and penalties are based on behaviour – but broadly it will be: the last four years (for non-careless behaviour), six years (for careless behaviour) or 20 years (for deliberate behaviour).