The new requirement to correct (RTC) penalties of up to 200% for offshore tax non- compliance matters came into full effect on 30 September 2018 when the official period of grace ended. However, taxpayers who had notified HMRC by then of their intention to disclose, still have a window of opportunity (broadly 90 days from the date HMRC issues a disclosure reference number) to finalise and submit their disclosures. Further, 30 September was the date by which more than 100 countries had started to exchange data under the common reporting standard, significantly increasing HMRC’s ability to identify irregularities offshore.

Among the taxpayers affected by the RTC legislation are many non-UK resident trusts and their UK resident beneficiaries. In some cases, the trustees have simply been unaware that the trust had UK tax obligations; in others, the sheer complexity of the legislation has outwitted the trustees and sometimes their advisers, resulting in the trust and/or its beneficiaries becoming inadvertently non-compliant.

Key Points

  • Determining whether a trust is UK resident.
  • A UK resident beneficiary can prevent the restrictions to UK tax liability applying.
  • Offshore trusts retain tax advantages despite complex compliance and record- keeping requirements.
  • ESC B18 allows the trust’s underlying UK tax to be offset against the beneficiaries’ liabilities.
  • Capital distributions can result in charges under the transfer of assets abroad rules.
  • Will more legislation follow HMRC’s consultation document on the taxation of trusts?
  • Comments on the consultation on the taxation of trusts are due by 30 January 2019.

Related articles

  • Continuing benefits of offshore trusts
  • IHT on gift to a trust in Jersey
  • Tax plans for offshore settlor interested trusts