Requirement to Correct – do you have an offshore tax issue?

The long arm of HMRC got somewhat longer still when toward the end of 2017 they were responsible for promoting new legal rules known as the Requirement to Correct (RTC). The ‘Correction’ in this situation refers to old taxation mistakes that a person, trustee or company living/operating outside the UK may have made in the past. The penalties are so potentially onerous that it is important for anyone with a link to the UK to review their situation.


The RTC legislation requires affected people and organisations to correct previous UK tax errors by September 30th, 2018, which is of course very soon.

If you are caught by this law and HMRC finds out (via International information sharing etc.), the penalties could be as much as 200% of the unpaid tax, and 10% of any related assets that you own that are deemed to be related to it.

The taxman can also make your transgression public, which could alert the media to your plight.

Who is affected

As an overseas person, you should review your situation and maybe take advice if you have –

  • Earned an income from letting UK property
  • Previously worked here in the UK
  • Been a trust beneficiary, getting an income from it whilst resident in the UK, whether or not you were responsible for the trust’s creation
  • Failed to claim the remittance basis on overseas income or capital gains whilst in the UK
  • Inherited, been loaned or been gifted UK assets by a deceased person when you were UK-resident

Or if you are, or have been, a trustee and you have –

  • Had an income from UK-based real estate
  • Benefitted from other types of UK asset while a resident in the UK
  • Had other types of UK assets, including financial loans to others

    And then possibly if you have been in control of a company that –
    • Owned or sold UK residential property between April 2013 and the present
    • Collected revenue from UK real estate
    • Has always been controlled and managed overseas
    • Maybe has once carried out business in the UK from a permanent office

Actions to Take

Assuming that you have previously carried out your UK tax reports correctly, all may be well. If on the other hand there are some grey areas, then now is the time to have a conversation with us at Odiri Tax Consultants so that we can review your situation and take any necessary action. Time is tight.

You should also be aware that the RTC rules do not allow you any leeway just because you once had professional advice in this respect. Ignorance, and any errors on the part of your past advisers, are regarded as no excuse. Importantly though, you are now allowed a second opinion if you do fall foul of an HMRC review. We stand ready to provide that opinion.

Anyone who is found to have been blatantly fraudulent can expect the full force of the law to be brought upon them, even going as far as a prison term.

Another change for expats to be aware of was brought in on April 6th 2017. Inheritance Tax now can affect individuals, trusts and companies if they have some interest in one or more UK residential properties – even indirectly, maybe by having loaned money or provided collateral to a person who then invested in UK residential property.

No Escape

Just because you are no longer resident in the UK, do not assume that you are beyond its reach. Any UK link, even fairly tangential, could be caught by the latest rules. We can assist in reducing the potential damage if you simply made an honest mistake – so that you pay the unpaid tax with interest, but crucially without what can otherwise be swingeing penalty fines.

And if you thought the UK was free of wealth taxes, then think again: there is (for overseas property owners) what amounts to the same thing: 6% ‘wealth tax’ levied every 10 years…

Loveth Watson

Loveth is a qualified accountant and tax consultant with over 20 years experience. She started her career with top 5 accountancy practice and held the position of tax manager prior to starting her own practice. Loveth is a member of the Institute of Financial Accountants, Institute of Public Accountants and the Association of Taxation Technicians. Loveth’s background in accounting, corporate and personal tax enable her to advise shareholders on the personal tax implications of corporate structuring and transactions, ensuring a holistic approach to tax planning is provided. Loveth advises clients in the areas of accounting, tax and business development. Her main focus is in delivering services to owner-managed businesses and seeking structured solutions to the challenges that they face.