Penalties for offshore asset moves

Produced by Tolley
Penalties for offshore asset moves

The following Owner-Managed Businesses guidance note Produced by Tolley provides comprehensive and up to date tax information covering:

  • Penalties for offshore asset moves
  • Scope of the regime
  • Meaning of relevant offshore asset move
  • Amount of the penalty
  • Appealing the penalty

Increased penalties can be levied where a failure to notify, failure to file a return or an inaccuracy within a return involves an ‘offshore matter’ or ‘offshore transfer’. 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. 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. See the Penalties for offshore matters and offshore transfers guidance note.

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.

Scope of the regime

To be charged an offshore asset move penalty:

  1. the taxpayer must have been charged an ‘original penalty’ (see below)

  2. the underlying behaviour which led to the original penalty must have been ‘deliberate’, whether or not it is also concealed (see below)

  3. there must have been a ’relevant offshore asset move’ after the tax liability arose (known as the ‘relevant time’). Both of these terms are explained under ‘Meaning of relevant offshore asset move’ below)

  4. the main reason, or one of the main reasons, behind the relevant offshore asset move is to prevent or delay HMRC from becoming aware of the UK tax

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