Deadline looms for those with offshore tax irregularities



Paul Day (KPMG UK), Graham Davies (HMRC UK) Rohini Sanghani (KPMG UK), Derek Scott (KPMG UK) and Darren Anton (KPMG Gibraltar)

KPMG’s latest tax update briefing event, held on the Sunborn Yacht Hotel in Gibraltar last month, was well attended by professionals from local businesses across all industries and brought together three of KPMG’s own tax experts as well as Graham Davies from the UK’s HM Revenue and Customs (HMRC).

The focus of the update was on the UK Requirement to Correct (“RTC”)and the deadline for settling historic UK tax liabilities with an emphasis on the Failure to Correct (“FTC”) penalties applying to taxpayers after 30th September 2018 where there is a failure to disclose offshore liabilities.

Following a welcome from KPMG Gibraltar’s Darren Anton, Head of Tax, Mr Davies opened proceedings with a review of the RTC and FTC legislation, which are a key part of HMRC’s No Safe Havens tax evasion strategy. He outlined that HMRC’s approach to RTC provides a fair way to encourage taxpayers with offshore affairs to clear up historical issues as well as to drive offshore tax compliance. However, for those people who fail to disclose by the deadline will face much harsher FTC penalties, starting at 200% of the offshore tax involved.

Mr Davies then advised that taxpayers (and their advisors) should now be considering their historic position from a UK income tax, inheritance tax and capital gains tax perspective, to avoid such strict penalties.

In the event that no action is taken prior to 30th September 2018, the only defence to these significant penalties will be whether the taxpayer had a reasonable excuse and Mr Davies noted that there were strict and limited interpretations as to what constituted a reasonable excuse.

Derek Scott, Associate Partner, Head of Tax Investigations KPMG UK, then joined a panel with Mr Davies to answer questions from Darren Anton and the audience.

Questions included setting out the actions that taxpayers, and their advisors, need to be taking now; had HMRC seen an increase in disclosures since the legislation was brought in last year (and whether they are anticipating a further increase in disclosures in the approach to 30th September 2018) and what individuals and Company and Trust Service Providers should be doing now in advance of 30th September 2018 deadline.

Mr Scott stressed that this regime could apply not just to cases of tax evasion but also when there has also been an innocent mistake or lack of reasonable care if the necessary corrective action was not undertaken by the end of September.

This was followed by a presentation on some of the changes to tax relating to UK property given by Paul Day, Tax Director KPMG UK.

Mr Day highlighted the new Inheritance Tax exposure created last year for non-domiciled individuals and certain trusts. He also discussed the moves underway by the UK Government to enhance the transparency of property ownership in the UK and the further changes in Capital Gains Tax for non-UK residents from April 2019.

The final session of the day was led by Rohini Sanghani, Tax Director KPMG UK, concentrating on Automatic Exchange of Information (AEOI).

Ms Sanghani reminded the audience that Common Reporting Standards implementation should now be completed for the early adopter jurisdictions (including Gibraltar where the next reporting date is 31 July) and the final CRS due diligence deadline for those jurisdictions in the second wave is 31 December 2018.

She went on to discuss some of the considerations when transitioning to “business as usual” such as who will take overall responsibility for AEOI, relevant individuals receiving adequate training, updating of systems and procedures, and the identification of risks and implementation of sufficient controls to ensure compliance.

Ms Sanghani also gave an overview of the KPMG AEOI Healthcheck that can assist financial institutions in implementing an AEOI risk framework with an effective monitoring programme and a reporting tool that converts system data into the relevant reporting schema for different jurisdictions.

Speaking after the event Darren Anton said it had been a very useful summary of important current tax issues that highlighted the need for action to be taken in order to avoid potentially costly consequences and thanked Graham Davies and is colleagues from KPMG UK who supported this event.