Do you have an interest in or connection to an offshore asset or entity?

If you have an interest in or a connection to an offshore asset or entity ('offshore arrangements') you are likely to attract the unwanted attention of HMRC even though they may have been set up for perfectly legitimate reasons and are tax compliant.

The increasing media exposé of offshore financial centres and the failure of HMRC to undertake successful criminal prosecutions of persons who have used offshore arrangements to evade tax has increased public pressure on the Government to address this issue.

There have been a number of disclosure facilities which previously enabled individuals, trustees and corporates to disclose any irregularities arising from offshore arrangements irrespective of whether or not it was set up intentionally to avoid or evade tax. In September 2016, HMRC announced the Worldwide Disclosure Facility (WDF), which is to run from 5 September 2016 to 30 September 2018 and they have said it will be their final disclosure facility. Whereas several previous disclosure facilities offered immunity from criminal prosecution provided a full disclosure was made, this is not the case for the WDF.

The change in HMRC’s approach is in response to its failure to successfully criminally prosecute those who committed tax evasion and results from the increase of information it will now receive under automatic exchanges of information such as the Common Reporting Standard (CRS) and Beneficial Ownership Register (BOR).

For CRS, over 100 countries have signed up to the agreement which will enable tax authorities to automatically exchange details of bank and other financial accounts held by individuals, trustees and corporates who are resident in other countries. This process has already started as nearly 50 countries who were the first signatories will receive details in September 2017 of bank accounts held in the period 1 January 2016 to 31 December 2016. The late joiners will receive details in September 2018 of bank accounts held in the period 1 January 2017 to 31 December 2017.  The USA has not joined CRS as it previously entered into the Foreign Account Tax Compliance Act (FATCA) with the UK and other countries.       

In the UK, BOR commenced on 6 April 2016, which required all corporates from 30 June 2016 to disclose details of the beneficial owners of their shares. Over 50 countries which includes the UK are committed to automatically share this information.

As mentioned HMRC will now receive on an annual basis a substantial amount of information which they believe will be a “game changer” in tackling loss of tax arising from offshore arrangements.

The Government have also announced the introduction of the Requirement to Correct Legislation (RTC), which commenced on 6 April 2017 and ends on 30 September 2018 and require individuals, trustees and partnerships to correct and/or disclose all irregularities that may have arisen from an offshore arrangement. Failure to do so could result in a criminal prosecution, with the potential to be named and shamed and a maximum penalty of up to 300% of the tax evaded or a penalty based on the value of the asset.

Offshore arrangements which originally were tax compliant may have become non-compliant if they have not been regularly checked to determine the effect of legislation that has or will be enacted – such as Annual Tax on Enveloped Dwellings and the new deemed domicile and overseas property legislation which is said to apply on or after 6 April 2017 (but has been delayed as a result of the snap general election).

Mazars National Tax Investigations Group includes former senior HMRC investigators with extensive experience of handling investigations concerned with offshore arrangements in HMRC and in private practice. If you are already under investigation (and it is never too late to seek help and advice), or have just received a letter from HMRC stating their intent to investigate you or your business or would just like to talk to a specialist, please contact us.

Alternatively, if you have an issue where you may have failed to disclose or understated your income/profits/gains or you are uncertain whether there are any issues which may require disclosure and would to like to see this resolved, we can assist. We would be happy to have a free of charge no obligation discussion with you to explore how we can help you.

Please contact our team either by:

Sending a message via our Tax investigations national contacts

or phone on 020 7063 4639, 0161 238 9235, or 0121 232 9519