HM Revenue and Customs Brief 14/11
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Issued 6 April 2011
Penalty for failure to disclose offshore income or gains
This brief explains how legislation in Schedule 10 to 2010
Finance Act allows for a higher penalty rate where income or gains that
arise outside the UK are underdeclared. People who do not declare
income or gains arising offshore could face penalties that are up to
200 per cent of the tax owed.
The new penalties for offshore non-compliance came into force
on 6 April and will apply for the 2011-12 tax year onwards to Income
Tax and Capital Gains Tax.
The offshore penalties legislation is part of the continuing
review of HMRCs powers,
deterrents and safeguards which aims to align and modernise
the framework for the taxes HM Revenue & Customs (HMRC)
The offshore penalty
The new offshore penalty is an enhancement of three existing
- failure to notify where you fail to tell us that you
have a source of income or a capital gain that may be taxable
- inaccuracy on a return where your Self Assessment tax
return is incorrect
- failure to file a tax return on time where you send your
tax return late
Schedule 10 to Finance Act 2010 introduced a new link between
these penalties and the tax transparency of the territory in which the
undeclared income or gain arises. Where it is harder for us to get
information from another country, the penalties for failing to declare
income or gains arising in that country will be higher.
Each territory has been placed into one of three categories.
used (PDF 48K) and the
list of territories are on the HMRC website.
There will be three new levels of penalty:
- Category 1 territories: the penalty rate is the same as
for existing penalties, up to 100 per cent of the tax due.
- Category 2 territories: the penalty is 1.5 times the
existing penalties, up to 150 per cent of tax due.
- Category 3 territories: the penalty is double the existing
penalties, up to 200 per cent of tax due..
All existing safeguards will still apply. There will be no
penalty if a person can demonstrate they have taken reasonable care to
get their tax right or have a reasonable excuse for a failure to notify
taxable income or gains.
Where penalties are due, HMRC can reduce them depending on how
helpful the individual is in assisting us to establish the correct
amount of tax due. The largest reductions will be for unprompted
disclosures. Unprompted means when you tell us about a tax issue you
have no reason to believe we have discovered or are about to discover
The existing penalties
A full explanation of these penalties, and the percentage
rates attached to each type of behaviour and disclosure, is available
on the HMRC website using the links below.
penalties internet page (Opens new window)
penalties agents and advisers
briefing on the offshore penalty (PDF 48K)
Disclosure Facility runs from 1 September 2009 until 31
to take care and avoid the inaccuracy and failure to notify penalties
About the Author
© Crown Copyright 2011.
A licence is needed to reproduce this article and has been republished
for educational / informational purposes only. Article reproduced by
permission of HM Revenue & Customs.
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Article Published/Sorted/Amended on Scopulus 2011-04-08 10:11:21 in Tax Articles