Draconian Failure to Correct (FtC) penalties on uncorrected offshore non-compliance are becoming infamous, particularly amongst professional Trustees and tax advisors who have to break the bad news of substantial penalties to their clients.
The starting penalty is 200% of the Potential Lost Revenue (PLR) in relation to underpaid Income Tax, Capital Gains Tax and Inheritance Tax (IHT). Reductions can be secured in a number of scenarios, for example if:
There is a further glimmer of hope defending against FtC penalties in relation to IHT. There are certain circumstances where these might be avoided due to the definition of offshore PLR in the legislation in Finance Act (No.2) 2017, Schedule 18.
The key dates differ depending on the nature of the failure, i.e. whether there was a failure to deliver a return or an inaccurate return was delivered, as well as the due date of the return.
Whilst the underlying IHT liability won’t necessarily be extinguished, advisers are recommended to seek specialist advice to check whether a defence can be constructed given the many nuances and pitfalls in the legislation.
For further information please contact Hayley Ives, Senior Manager, Tax Resolutions or Sean Wakeman, Partner, Tax Resolutions.