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Welcome to our regular update of what's new and relevant in the world of HMRC, tax disputes and investigations.
A lot has already been written about the new 'Requirement to Correct' provisions coming into effect on 30 September 2018. In brief, the legislation introduced in last year's Finance (No 2) Act requires taxpayers to disclose outstanding undeclared offshore liabilities for income tax, CGT and IHT to HMRC before 30 September 2018 or face draconian penalties in the range 100% to 200% of the tax involved. In addition, where the tax involved exceeds £25,000, a further penalty of up to 10% of the assets connected to the failure may be due. In this update we look at the risks to advisors who have clients with offshore assets and offer some solutions to avoid any potential client issues from arising.
What's my issue as an advisor who has clients with offshore assets?
Normally a client can rely on a defence of 'reasonable excuse' if he/she is relying on credible advice from a reputable tax advisor to avoid HMRC imposing tax penalties where it is later found there are historic tax issues.
However, under this legislation such advice can be 'disqualified' on a number of grounds including where you advised on the original tax planning or structuring which has led to subsequent UK tax liabilities. For example, where a client acted in good faith but has undeclared tax liabilities because the initial advice was based on an interpretation of the law later found to be incorrect. In these circumstances, despite the client taking the reasonable steps of taking advice from a reputable advisor and being entitled to rely on it, HMRC may still be able to charge penalties.
HMRC guidance indicates the disqualification of advice provisions will be widely interpreted and is likely to catch most advice. Therefore, if you have provided advice to clients on offshore matters or structures, this original advice could be ignored by HMRC if it is later discovered that there are UK tax liabilities.
Given this potential risk, we're seeing a number of clients, other advisory firms and trustees requesting a review of the initial advice or structure to either confirm that it remains robust or, if there are historic tax issues, to advise on the best way of disclosing and resolving all tax issues. Obtaining a second opinion on the advice from an independent qualified person should ensure that this advice does not fall within the disqualified advice rule and so can be relied upon by the client.
How can Pannu Tax help?
To ensure that our clients receive the best advice, both from a tax technical perspective and when disclosing and negotiating the best possible outcome with HMRC, we’re pleased to announce the arrival of Gary Telford to Pannu Tax as a Senior Consultant. Gary is a highly regarded tax advisor and former Private Client Tax Partner with PwC who has over 30 years of experience in advising on complex tax structures, trusts and non-domiciled individuals (further details of Gary's background and experience can be found on our website here.
Gary's arrival further strengthens our ability to compete with international and national advisory firms in terms of quality of advice and service, but at a reasonable cost. We combine first class technical skills with leading edge advice on HMRCs information powers, ability to raise assessments, penalties and HMRC negotiation. To find out more about how Gary or any advisor at Pannu Tax can assist you, please click here to contact us.
- Proactively review and test structures and trusts and advise on any UK tax issues or exposures;
- Advise non-UK tax domiciled clients and their trusts on the implications of the new deemed domicile legislation;
- Review the historic non- UK domicile and/or tax residence status for clients and entities;
- Advise on any restructuring which may be required or available to ensure that the structure remains tax efficient;
- Deal effectively with any ongoing HMRC investigations and enquiries;
- Where there are historic tax issues that cannot be avoided, advise on how best to resolve these with HMRC, manage the disclosure to conclusion and ensure that clients receive the best possible outcome.
If you have clients who might benefit from a review of their arrangements or believe they may have historic tax issues please contact us.