As of October 1, 2018, penalties for offshore activities and offshore transfers for Income Tax or Capital Gains Tax liabilities will be based on two significant elements. Whether or not:

• You failed to comply with RTC legislation during tax years 2015–2016 or prior tax years 
• You were unable to comply with RTC legislation during tax years 2015–2016 or previous tax years 

You were required to disclose in accordance with RTC by September 30, 2018. If you follow the two-stage notice and disclosure approach under the RTC statute, HMRC will set a specific disclosure date. The deadline for the penalties is the date that applies to you, whatever date.

Failure to correct (FTC) penalties relates to the penalty imposed for breaches of RTC laws on the failure to disclose necessary information about income and gains. These penalties are applicable if you fail to disclose under RTC before the corresponding deadline.

The FTC Penalties are a minimum penalty of 100% of the tax you owe due to offshore noncompliance. The highest penalty rate, often known as the “standard” rate, is 200%; however, if your disclosures are of reasonable quality, this amount may be reduced. FTC penalties don’t vary according to the original action that led to the noncompliance (whether it was “careless” or “deliberate”), the location of the income gains or assets, etc. and geographic concepts are unimportant.  However, any noncompliance resulting in FTC penalties can lead to asset movements and asset-based penalties. 

When it comes to the FTC, penalties might differ depending on whether the RTC disclosure was made voluntarily (before HMRC made contact) or involuntarily (after HMRC made contact) and on the content of the disclosure. The penalty is proportional to the potential loss of revenue (PLR).

The usual penalty of 200% may be decreased by the quality of the disclosure to a minimum of 100% when the disclosure is non-prompted or to a minimum of 150% when the disclosure is prompted.