Declare offshore income in September, or face punitive fines, warns tax expert

Taxpayers with undeclared income generated from offshore assets and investments have September in which to declare their earnings, or potentially face a standard penalty of 200 per cent of underpaid taxes, a surcharge of 50 per cent for deliberate avoidance, and the prospect of being named and shamed, a leading tax expert is warning.

Ian Williams, a partner with Campbell Dallas, says taxpayers and trusts with undeclared income can take advantage of a disclosure ‘window’ before the new rules come into force on 1st October 2018.

He said: “Disclosure will apply to undeclared offshore income, assets, transfers and investments, and the applicable taxes include Income Tax, Capital Gains Tax and Inheritance Tax. Qualifying disclosures will be subject to interest charges and the ‘general’ penalty regime, ranging from 0 per cent to 30 per cent, but deliberate behaviour will attract significantly higher penalties. In the latter category, taxpayers or trusts should seek urgent assistance to notify HMRC.”

He added: “If HMRC has not received disclosures by 30th September, the new punitive regime comes into force. Penalties may be negotiated down to 100% if there is full disclosure and co-operation, and the defence of ‘reasonable excuse’ is available, but there is little room for manoeuvre due to ignorance or human error.

“We would urge any taxpayers or trusts that may be in this position, to seek advice as soon as possible. The financial consequences of not doing so could be ruinous, and the reputational damage from being named and shamed could last a lifetime.”

Campbell Dallas has highlighted other points that will apply from 1st October.

Mr Williams added: “With global sharing of data and information, HMRC is increasingly aware of offshore investments and assets, and therefore of the income that is being generated. The only way to deal with this new tax order is to comply with the legislation, and to resolve any unpaid taxes sooner rather than later.”