Requirement to Correct Tax Due on Offshore Assets

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Taxpayers with undeclared tax in relation to overseas assets must step forward now to avoid severe penalties – deadline 30 September 2018!

All accountants, tax advisers and individual taxpayers are being politely encouraged to ensure all taxpayers are not falling short of the soon-to-be-implemented Requirement to Correct (RTC) rules. This represents a statutory obligation to disclose any unpaid UK tax due in relation to overseas assets.

HMRC is urging everyone with overseas affairs to check whether they fall under the RTC rules, thus required to make a correction disclosing all unpaid tax. This includes Income Tax, Capital Gains Tax and Inheritance Tax. Taxpayers who identify errors must take necessary action before 30 September 2018.

With the 30 September 2018 deadline looming, RRL is urging everyone affected to act now to avoid any unwelcome extra penalties. If the disclosure of any previously undeclared tax is made by the deadline individuals, companies and trusts will be faced with a minimum penalty of 100% of the tax involved.

However, if the deadline is exceeded the maximum standard penalty is 200% of the tax involved, it is under HMRC’s discretion case by case, considering many factors, whether or not this penalty is reduced (but only to a minimum of 100%). The most serious cases will have an additional penalty of 10% of the value of the relevant assets where tax involved exceeds £25,000 and a further penalty of 50% of standard penalty where it’s proven by HMRC that the assets have been intentionally re-located overseas to avoid tax. HMRC will also ‘name and shame’ parties concerned on a public website.

Consequently, RTC penalties could apply to those who have tax liabilities which are due to careless or deliberate behaviour, or even for those who took reasonable care. No penalties will be charged where a taxpayer satisfies HMRC that they have a ‘reasonable excuse’. However, rather unfairly, HMRC excludes scenarios where the taxpayer has taken advice but the advice has turned out to be wrong. Consequently, taxpayers should seek advice from a Chartered Tax Adviser who has experience of dealing with the UK tax aspects associated with non-UK income, gains and assets.

Some examples of those effected by the new RTC rules are: taxpayers who have moved between the UK and an overseas country and have assets or income, such as, shares in a businesses or family holdings; individuals that have rented out a holiday let in another country and have failed to disclose the income; undeclared capital gains tax or inheritance tax; undeclared income tax payable on chargeable event gains realised in relation to offshore investment bonds; companies that may be operating from abroad, non-resident landlords being a prime example; any trusts with undeclared overseas interest and trusts that missed Inheritance Tax 10 year anniversary charges in respect of UK situs assets held are also effected.

It is important to note the RTC rules apply to any undisclosed overseas affairs dated before 6 April 2017, it does not matter how much or how little tax is due, a disclosure is required.

HMRC’s guidance on the matter is available to read here.


This publication has been prepared by Robinson Reed Layton LLP. It is to be treated as a general guide only and is not intended to be a comprehensive statement of the law or represent specific tax advice. No liability is accepted for the opinions it contains, or for any errors or omissions. All rights reserved.