Commentary

A4.575C Asset-based penalties for offshore inaccuracies and failures

Administration and compliance

A4.575C Asset-based penalties for offshore inaccuracies and failures

A4.575C Asset-based penalties for offshore inaccuracies and failures

An asset-based penalty is charged as an additional penalty for serious cases of offshore tax evasion. This is based on the value of the asset underlying the evasion and is levied on taxpayers who have been already charged a penalty for deliberate offshore inaccuracies and failures. It came into force for income tax and CGT purposes, for tax years beginning on or after 6 April 2016, and for IHT purposes, in relation to transfers of value made on or after 1 April 20171.

An asset-based penalty is payable by a person where2:

  1.  

    (a)     one or more 'standard' offshore tax penalties have been imposed on that person in relation to a tax year3; and

  2.  

    (b)     the potential lost revenue threshold has been met in relation to that tax year

Where the tax at stake is income tax or capital gains tax, the tax year is the one to which the inaccuracy or failure penalised by the relevant Finance Acts4 relates. For inheritance tax, it is the year beginning on 6 April and ending on the following 5 April in which the liability to the tax at stake first arose5. The potential lost revenue threshold is reached where the offshore potential lost revenue in relation to a tax year exceeds £25,0006.

The 'standard' offshore penalties referred to are those for:

  1.  

    (a)     inaccuracy in a document (under FA 2007, Sch 24, para 1)

  2.  

    (b)     failure to notify (under FA 2008, Sch 41, para 1)

  3.  

    (c)     failure to make

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