The Requirement to Correct legislation & what it means for your firm

What is the Requirement To Correct?

Requirement To Correct (RTC) is a new UK tax legislation that applies to UK tax payers with income, investments or assets overseas. It requires people to check and correct their liabilities by 30 September 2018.

You may have already received a letter from HMRC letting you know about checking your need to report any overseas gains or income. However we recommend that if you have overseas interests, or if you are living overseas but have UK income or assets, you should consider your circumstances and seek professional advice as soon as possible to avoid HMRC’s harsher penalty regime which comes in on 1 October 2018.

Who does RTC apply to?

If you are a UK taxpayer and have overseas income or gains (including investments and accounts) depending on your circumstances you may be required to tell HMRC. This includes renting out an overseas property and may also include the transfer of income or assets from one country to another.

By ‘overseas’, HMRC means the Channel Islands, the Isle of Man, the Republic of Ireland, the EU or anywhere else in the world.

The RTC legislation may also apply if you live overseas and pay tax outside the UK. For example if you rent out your UK home whilst living overseas you may have UK tax to pay on the rental income that you receive. HMRC needs to be informed of any UK income or gains, even if you are living overseas and paying tax in another country.

What do you need to do?

You need to tell HMRC about your overseas income or gains, which may include:

1. Overseas bank accounts (even if tax has been deducted on interest and even if you have not made any withdrawals)
2. Bond deposits and loans
3. Stocks and shares
4. Rental income from land and buildings (including timeshares and similar arrangements)
5. Disposal of assets (such as art, antiques, jewellery and property)
6. Incorrect claims for Overseas Workday Relief
7. Incorrect claims for Foreign Tax Credit Relief
8. Undeclared taxable remittances to the UK
9. UK income or gains received abroad (whilst you are living overseas)

Why act now?

If you tell HMRC and additional tax is payable, there will be interest due on tax that is overdue. They may also issue a penalty, which will be covered by the current penalty rules. Disclosures under RTC must be made by 30 September 2018.

From 1 October 2018, HMRC have pledged to impose much harsher penalties on unpaid tax due on overseas income and assets. Where a penalty is applied it will be a standard 200% of the tax due, if it could have been reported under the RTC arrangement. HMRC will consider, as part of the penalty, an individual’s willingness to cooperate; the quality of the information they provide; and their willingness to provide details of others who may have been party to any original non disclosure.

HMRC have access to financial information about individuals from over 100 jurisdictions in line with the Common Reporting Standard. This provides details about overseas accounts, structures, trust and investments. It is our opinion that HMRC are investing resources in ensuring that they are aware of UK taxpayers’ assets, whether based in the UK or overseas, and the tax that is due. The first step is RTC, which encourages voluntary checking and disclosure.

If you would like to talk about your circumstances and would like to make a disclosure under the RTC legislation, or if you live overseas but have UK income or assets please contact Alliotts Chartered Accountants for further advice.