Requirement to Correct: certificate of tax position

23rd September 2019

In an age where information is being shared across the world almost instantaneously, HMRC have details of UK residents with interests in overseas jurisdictions. As a result of the automatic exchange of information, known as the Common Reporting Standard (CRS), to which nearly 100 countries have signed up, HMRC are more likely to identify non-compliance.

Being a statutory obligation for taxpayers with overseas assets to correct their historic UK tax position, the Requirement to Correct (RTC) applied to any person, such as individuals, partnerships, trustees and non-resident landlord companies, with undeclared UK tax. The deadline for RTC of 30 September 2018 has now passed and we are now under the Failure to Correct (FTC) regime, where penalties are punitive (a tax geared penalty between 100% and 200% of the additional tax), can include a percentage of the asset base (up to 10%) and the potential of being ‘named and shamed’.

Typically, a generic letter will be sent by HMRC to those they believe have offshore income and gains that could be subject to UK tax. The letter is vague in that it will fail to specify what information they hold and will set a deadline for the taxpayer to respond ticking one of two options on the certificate of tax position; to confirm they have tax irregularities which they will disclose via the Worldwide Disclosure Facility, or to confirm they are tax compliant.

Care needs to be taken before signing and submitting this certificate as it includes a warning that if a false statement is made, it could lead to criminal prosecution. It is highly recommended that one seeks professional advice before signing and submitting the document. It is arguable whether the certificate is legally required to be submitted as it does not explain the basis on which it has been issued.

Whilst HMRC’s tactics may lead one to ‘feel guilty’ or uncomfortable, in our experience, it is advisable to open dialogue with HMRC to show cooperation, as this often leads to HMRC specifying what information they hold. The area of UK taxation of offshore income and gains can be extremely complex, and it is imperative that specialist advice is sought to establish if there is a liability in the first instance, and how to deal with HMRC.

Should you require any advice on the failure to correct regime and/or making a disclosure to HMRC, please do not hesitate to discuss these with your usual haysmacintyre contact or with Kiran Chotai, Senior Manager in our Private Client and Trusts team.

This article was featured in our Summer 2019 Private Client Briefing. To read more, click here.

Awards and Accreditations

Accounting Excellence Large Firm of the Year 2023
eprivateclient top accountancy firm 2023

Get in touch