Press Room

May 11, 2018

From the United Kingdom: Requirement To Correct – How to Avoid Punitive Penalties?

Mark Davies - Mark Davies & Associates, a collaborating firm of Andersen Global


The UK has introduced a new way to enforce the collection of tax from all taxpayers with UK tax liabilities - the Requirement To Correct (RTC). The RTC imposes an obligation on anyone who has under-declared UK tax liabilities to make a disclosure to HM Revenue & Customs (HMRC), the UK tax authority.

Failure to disclose by September 30, 2018, will result in punitive penalties. The standard penalty is between 100% and 200% of the tax owed. In addition, HMRC may:

  • Charge an additional penalty of 50% of the standard penalty, if HMRC can show that funds have been moved outside the UK to avoid the RTC.
  • Charge an asset-based penalty of up to 10% of the relevant asset where the tax liability is over £25,000 in any tax year.
  • Name and shame anyone who owes more than £25,000 of tax.

Penalties may be avoided where the taxpayer engages an independent UK tax advisor to perform a tax review and either help the taxpayer meet his or her obligations, or provide evidence that the taxpayer took reasonable care. For this purpose, it is insufficient to get a tax review from the original advisor who helped set up a non-UK structure.

The RTC applies to individuals, partnerships, trustees or non-resident landlord companies. In particular, the following persons should consider obtaining a tax review:

  • Anyone receiving UK rental income;
  • Individuals who live in the UK or regularly visit the UK;
  • Trustees holding UK assets;
  • Trustees holding companies or partnerships which hold UK real estate, and
  • Trusts settled by a UK domiciled individual.

We can help. We assist clients in determining whether they have a current or historic UK tax obligation. Where necessary we can assist with disclosing historic obligations to HMRC whilst minimizing the client’s overall liability.