Increased tax investigation activity by HMRC

With more and more pressure being applied to HMRC to identify tax avoiders, and more resources being allocated to them in order to do so, the tax authorities are taking an increasingly robust approach to tax investigations and disputes.

If you are the subject of a tax investigation, if you have a tax dispute, or undeclared tax, it’s essential that you take advantage of any disclosure opportunities available to you and keep abreast of any changes in the rules which may adversely affect you.

In this post, we outline the most recent changes to offshore assessment time limits. However, if you think you may be affected by these changes or may be at risk of any tax investigation, we recommend that you take immediate professional advice.

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Extension of offshore time limits

The assessment time limits have been increased for offshore income and gains to 12 years. Similarly, the time limits for proceedings for the recovery of Inheritance Tax have been increased to 12 years where the lost tax involves an “offshore matter”. Where an assessment involves a loss of tax brought about deliberately the assessment time limit is 20 years after the end of the year of assessment and this time limit will not change.

The legislation does not apply to Corporation Tax or where HMRC has received information from another tax authority under automatic exchange of information.

The potential extension of time limits apply from the 2013/14 tax year where the loss of tax is brought about by careless behaviour and from the 2015/16 tax year in other cases.

Assessment time limits are ordinarily four years (six years in the case of carelessness by the taxpayer). The justification for the extension of time limits is the longer time it can take HMRC to establish the facts about offshore transactions, particularly if they involve complex offshore structures.

The legislation cannot be used to go back earlier than 2013/14. If there has been careless behaviour HMRC can make an assessment for up to 12 years from 2013/14 in respect of offshore matters but HMRC could not raise an assessment for 2012/13 or earlier (unless there is deliberate behaviour by the taxpayer).

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Tackling tax avoidance, evasion and other forms of non-compliance

A policy paper has been issued which:

  • outlines HMRC’s strategy and approach to compliance for different taxpayer types
  • details the government’s record in addressing areas where risks of non-compliance have been identified
  • provides a summary of the government’s investment in HMRC and its commitment to further action.

The policy paper lists details of over 100 measures the government has introduced since 2010 covering avoidance, evasion and non-compliance.

Do you need help with a tax dispute or investigation?

If you think you may be affected by any of these changes, we recommend you take professional advice.  You can contact a member of our team today on 020 3195 1300.

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