Requirement to Correct

Requirement to Correct

It seems that tax evasion and avoidance is something we see in the newspapers every other day. Since the big financial collapse in 2008, governments under pressure from campaigners have attempted to tighten the loopholes that allowed evasion and avoidance to happen in the first place.

The next big phase of this campaign has been announced and it’s called the “Requirement to Correct” regulations.

In this article, the Smart Team looks at what UK taxpayers with overseas interests need to know.


Requirement to Correct according to HMRC

The Requirement to Correct (RTC) legislation concerns “those with undeclared offshore tax liabilities (relating to Income Tax, Capital Gains Tax or Inheritance Tax for the relevant periods) to disclose those to HMRC on or before 30 September 2018.”

What’s affected by RTC? Any offshore matters (specifically income, assets, or capital gains you have made outside the UK) and offshore transfers (any income or capital gains you’ve made in the UK but have transferred out of the country).

RTC is intended to find income tax, capital gains tax, and inheritance tax payments that have not been made to HMRC because they haven’t been declared.

Specifically, HMRC want to find taxpayers who have:

  • failed to complete a return
  • made mistakes in their returns (whether you are aware of those mistakes or not)
  • not informed HMRC that they should have sent a return because you had income to declare.


Requirement to Correct – the deadlines

The deadline for compliance is 30th September 2018.

By that time, you must declare all non-compliance covering the period up to and including 5th April 2017.


Requirement to Correct – if you declare by the deadline

If you comply, you will be expected to pay the money you owe to HMRC plus any interest on the overdue amount.

However, you may be able to escape any interest charges depending on how HMRC have assessed the level of your cooperation during their investigation.


Requirement to Correct – if you miss the deadline

If you don’t inform HMRC of your undeclared income by 30th September 2018, you are almost certain to face a 100% penalty on the tax you owe.

If HMRC do not believe that you are being particularly helpful during their investigation, the fine may rise to 200%.

If HMRC believe that you have moved your assets in a purposeful attempt to hide liabilities from them, the fine could go as high as 300%.

If you have owed more than £25,000 tax, HMRC may add another 10% asset fine to your tax account.

HMRC have also indicated that they are willing to pursue a “name and shame” policy for the worst offenders. Your name would be put on the internet for anyone to find when performing checks on you and your company with a view to buying from you or supplying you. The reputational damage this could cause would be significant.


Requirement to Correct – what if HMRC are already investigating you?

The same rules apply – you must declare everything by 30th September 2018. Please let the official dealing with your tax investigation know beforehand.


Requirement to Correct – what about second homes abroad?

If you’ve been renting out your property or you’ve recently sold it, get in touch with the Smart Team just to make sure you’ve handled all the paperwork properly as you may be liable for either income tax or Capital Gains Tax here in the UK.

If you’re not making any money from your property and you have a bank account in the country of your second home linked to that property, you should have nothing to worry about. If you’re concerned, contact the Smart Team straight away.


Requirement to Correct – the next step

If there is something you need to tell HMRC, there are two ways to do it. You can either use HMRC’s digital disclosure facility or speak to the officer in charge of your tax investigation if you’re currently the subject of one.


Requirement to Correct – talk to the Smart Team

By any measurable standards, the amount of loss taxpayers could suffer as a result of RTC is enormous.

This is happening, it’s real, and if there is something you’re not sure about, you need to take action.

Before you go to HMRC, speak to Smart Team first on 01202 577 500 or email us on

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