From 2019, offshore matters could be raised by HMRC 12 years afterwards, even if the taxpayer has made an innocent error.
Taxpayer behaviour Earliest tax year caught ordinary assessment time limit Extended Offshore time limit
Reasonable Care taken 2015-2016 Four years, ie to 5 April 2020 12 years, ie to 5 April 2028
Carelessness 2013-2014 Six years. ie to 5 April 2020 12 years ie to 5 April 2026
Currently, the time limit for HMRC to make an assessment to income tax and capital gains tax is four years if the taxpayer took reasonable care. This is from the end of the tax year. (six years for careless behaviour and twenty years for deliberate behaviour).
It is important to note:
- it applies to income and capital gains tax and to inheritance tax;
- personal representatives are excluded from the changes, with the time limits in TMA 1970, s40 continuing to apply;
- the extension will not be made for corporation tax;
- the draft legislation prohibits an assessment being raised to the extent that lost tax arises due to transfer pricing adjustments; and
- the extended time limit will not apply if, through receipt of information by way of automatic exchange arrangements, it was reasonable to expect HMRC to be aware of and have assessed the lost tax before the end of the normal time limit.
Taxpayers and their advisors must keep adequate records to defend their position should HMRC seek to raise an assessment. However, the law is not being amended to require taxpayers to keep records for the extended limit. It should be noted that failure to do so could leave the taxpayer struggling to defend a later assessment.
We would advise all out clients with offshore interests to keep records for the full 12 years.
If you would like to talk to someone about this more, or need addition advise, please contact us at firstname.lastname@example.org