13 Feb 2019 Requirement to Correct My client inherited a Swiss bank account. He is UK resident and domiciled but has never included income and gains from this account in his tax returns. He did not tell HMRC about the overseas asset, as he did not set the account up and always intended to close the account. HMRC have sent a letter which refers to the overseas account and mentions the Requirement to Correct. What happens if he does not contact HMRC by 30 September, as mentioned in the letter? HMRC have started writing to a significant number of taxpayers who they believe have offshore income and or gains. Under the Common Reporting Standard (CRS), HMRC now automatically receives financial information from 102 countries worldwide and so it is likely that HMRC have written to your client because of information they have received from the country where the account is held. The Requirement To Correct (RTC) is a new legislative measure which sets a final deadline for people with offshore tax irregularities to regularise their offshore tax affairs. Not doing so by 30 September 2018 will result in exposure to a new tougher penalty regime called Failure to Correct (FTC). The RTC applies to all individuals with undeclared income tax, capital gains tax and inheritance tax arising from offshore matters on or before 5 April 2017. The standard penalty starts at 200% of the tax at stake, with reductions for making a voluntary disclosure and the quality of cooperation with HMRC, to a minimum 100% of the tax. At present, the penalty could be as low as 20%. The RTC does not take into account who set the account up, only that the income and/or gains generated on the assets in the account since your client became the beneficial owner would be subject to UK tax. You should seek expert tax advice immediately on behalf of your client, to discuss the facts relating to your client’s affairs, and whether it is necessary to notify HMRC of the intention to make a disclosure by 30 September 2018. In the worst case scenario, it is also worth noting that a new strict liability criminal offence has been introduced for undeclared offshore income and gains. If your client makes a disclosure, the penalty applied to income and gains from the Swiss account is likely to be in the range between 35%-70%. When compared to the FTC range of 100%-200%, the benefit of making a timely disclosure is clear. More detail on the new rules and their effects. Here to help With more than 60 highly skilled tax and funding specialists, advising on over 2,000 complex tax issues each year, we work with your practice to provide up to date, practical solutions. If you have a client in a similar situation, or have a tax question of your own, we're here to help on 0345 223 2727. Or to find out more about our services, email taxmarketinguk@markel.com. Tagged HMRC