Requirement to Correct – Tax on foreign income and gains

There is a popular misconception that where tax is suffered on foreign income or gains in the source country then no further UK tax is payable. This is very often not the case and it is therefore important for individuals to ensure that any UK tax responsibilities are being met.

There have always been significant penalties for taxpayers who fail to notify HMRC of their tax liabilities. Where those liabilities relate to income or gains arising outside the UK the penalty regime becomes much harsher from 30 September 2018. HM Revenue & Customs are currently operating a Requirement to Correct regime which obliges any UK taxpayers with underpaid tax resulting from foreign income and gains arising before 5 April 2017 to notify them before 30 September 2018. There are already penalties in place for such tax underpayments but if the taxpayer notifies HM Revenue & Customs of such tax liabilities after 30 September 2018 then they will be treated under the ‘Failure to Correct’ regime, which carries far harsher penalties. There is a raft of new penalties which will be implemented as part of the new regime but the minimum penalty a taxpayer can hope for, after 30 September 2018, will be 100% of the tax underpaid.

HM Revenue & Customs have arrangements with most other tax authorities around the world to exchange information on taxpayers’ income, gains and assets to ensure that the right amount of tax is being paid in the right country. The increase in the number and scope of these ‘Automatic Exchange of Information’ agreements together with advancing technology mean that HM Revenue & Customs know more than ever before about the foreign interests of UK taxpayers, and of the UK interests of non-UK taxpayers.  It should be noted that there is no behavioural differentiation within the regime which will apply equally to both innocent mistakes and deliberate actions and that the regime also applies to inheritance tax.

If you have any concerns regarding the correct treatment of your foreign income or gains then Wright Vigar has experts in this field who will be able to help. We can review your UK tax position and either give you the peace of mind that your UK tax responsibilities are being met or identify any areas where we think that underpayments of tax may have occurred. We will also be able to deal with HM Revenue & Customs on your behalf where disclosures are required and advise you of strategies we think will be able to make your tax affairs more efficient.

If this is an area of concern that you would like to discuss further with a member of the team then please do not hesitate to get in touch with Matthew Field, Senior Tax Consultant, by calling 01522 531341 or email matthew.field@wrightvigar.co.uk – Matthew or a member of our specialist tax team will be on-hand to help and advise you.