Penalties for offshore asset moves

The increased penalties which can be levied where a failure to notify, failure to file a return or an inaccuracy within a return involves an ‘offshore matter’, have been in place since 2011. The return involves an ‘offshore matter’ if income tax or capital gains tax is at stake and the income or gain arises from an overseas source, ie the taxpayer must be taxable in the UK on this foreign income or gains. The maximum penalty under these rules is 200% of the tax at stake, with the specific penalty charged depending on the territory in which the income or gains arise. See the Penalties for offshore matters guidance note.

The categorisation of the territory depends on the transparency of the jurisdiction and the extent to which is shares information with HMRC, whether automatically or otherwise.

However, the Government felt that these rules did not sufficiently penalise taxpayers who moved their underlying assets from one territory in order to stay one step ahead of the international tax transparency agenda.

Following a consultation  in 2014, legislation was introduced with effect from 27 March 2015 to introduce an additional penalty, on top of the penalty charged for the offshore matter, where the underlying assets had been moved or the taxpayer with beneficial ownership of the asset had changed his tax residence. The additional penalty is calculated as a percentage of the original penalty, rather than the tax at stake. The additional penalty is fixed at 50% of the original penalty; it cannot be reduced based on disclosure or help given to HMRC by the taxpayer.