UK: Requirement To Correct Tax On Offshore Assets

Last Updated: 16 August 2018
Article by Terence Pay

Taxpayers have just over a month – until 30 September 2018 – to disclose to HMRC any undeclared UK tax liabilities on overseas income or assets under the Requirement to Correct (RTC) legislation.

Tough penalties will apply if HMRC discovers tax irregularities that have not been corrected by the deadline.

This is also the deadline by which HMRC will receive information from around 100 countries, under the Common Reporting Standard, on financial accounts held overseas by UK resident taxpayers. This information will enable HMRC to more easily detect tax irregularities in respect of overseas assets.

HMRC is encouraging taxpayers to review their tax affairs and to report any undisclosed liabilities before the deadline to avoid the heavy penalties that may be imposed if a taxpayer fails to correct and HMRC discovers an error after the deadline has passed.

The scope of the RTC legislation is broad and can affect taxpayers who have made innocent errors, as well as deliberate defaulters.

What does the RTC legislation cover?

The legislation governing the 'Requirement to Correct' (RTC) is set out in Finance (No 2) Act 2017 and applies to tax non-compliance involving offshore matters or transfers relating to a period before 6 April 2017 that is within the time limit for assessment (see below).

It covers income tax, capital gains tax, or inheritance tax on:

  • income arising from a source in a territory outside the UK, or
  • assets situated in a territory outside the UK, or
  • activities carried on wholly or mainly in a territory outside the UK, or
  • anything having effect as if it were income, assets or activities of a kind described above.

The RTC also applies to UK source income (or sale proceeds arising from a capital gain) that was transferred overseas before 6 April 2017. For inheritance tax, the tax non-compliance may involve the transfer of an asset outside the UK.

All taxpayers are within the RTC, including individuals, trustees and companies.

Assessment time limits – how far back can HMRC go?

The normal time limits for HMRC to assess historic income tax and capital gains tax depend on the taxpayer's behaviour:

  • Four years from the end of the tax year for innocent errors – from 2013/14 onwards
  • Six years from the end of the tax year for careless errors – from 2011/12 onwards
  • Twenty years from the end of the tax year for deliberate error – from 1997/98 onwards

Past liabilities that have arisen where the assessment window is closed fall outside the RTC. However, it should be noted that where a taxpayer believes there is an innocent error, HMRC may seek to argue that the error was careless or deliberate, so that additional tax years can be assessed. Therefore, the time limits can be ambiguous.

What are the penalties for failing to correct?

The standard penalty is 200% of the tax not corrected, although this may be reduced depending on the taxpayer's level of co-operation with HMRC, but subject to a minimum of 100% (the minimum is 150% where disclosure is prompted by HMRC after 30 September 2018).

In the most serious cases, where the uncorrected tax is over £25,000 in any given tax year, there is an additional penalty of up to 10% of the value of the assets connected to the non-compliance, plus possible 'naming and shaming' of the taxpayer.

These punitive penalties will apply even if the mistake was not deliberate.

If HMRC can show that assets have been moved in an attempt to avoid the RTC, an additional penalty of 50% of the standard penalty may apply.

What is a reasonable excuse?

If the taxpayer can show that he has a 'reasonable excuse' for not correcting the non-compliance, the RTC penalties may not apply.

In certain circumstances, reliance on professional advice may provide a defence. However, the defence may be disqualified if, for example, the adviser did not have appropriate expertise to give advice; the adviser was the promoter or facilitator of a tax avoidance arrangement; or the advice was provided to a different person.

What action should taxpayers take?

All taxpayers with overseas interests should review their UK tax position to ensure that all tax liabilities have been correctly reported. This includes UK resident taxpayers with interests in offshore structures and remittance basis users.

Taxpayers should ensure they have correctly reported their UK residence status and domicile status, as mistakes could be costly. For example, If HMRC successfully challenges an individual's claim to be non-UK domiciled, the individual will be exposed to RTC penalties, unless they can demonstrate a reasonable excuse.

Taxpayers whose residence or domicile status is unclear are advised to seek a professional opinion from an adviser with relevant expertise in such matters, as these can be complex areas.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Similar Articles
Relevancy Powered by MondaqAI
In association with
Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions