The term “offshore non-compliance” describes a situation in which a taxpayer owes tax to HMRC for failing to pay tax, and that liability involves an offshore issue or a transfer to an offshore jurisdiction. 

If the unpaid tax is related to or predicated on, any of the following, then the tax evasion involves an offshore topic:

• Income resulting from activities carried out in a country or territory other than the United Kingdom.
• Assets that are located in a country or territory other than the United Kingdom
• Activities carried out predominantly in a territory other than the UK.
• Anything that has the same impact as if it were income, assets, or actions of the kind outlined earlier.

If the income (or sale proceeds in the case of a capital gain) was received or moved overseas before 6 April 2017, the tax non-compliance involves an offshore transaction.

Concerning Inheritance Tax, on or before 5 April 2017, if the transaction is not offshore, the disposition resulting in the transfer of value contains a transfer of assets. After that disposition, the assets, or any part of the assets, are transferred to a jurisdiction outside the UK, and then the tax non-compliance entails an offshore transaction.

Any assets derived from or represent the income, proceeds, or assets that have been transferred are considered part of the income, proceeds, or assets that have been transferred in every circumstance. Therefore, if the non-compliance is determined to satisfy these definitions, the rule is applicable, and failing to correct the status will result in an increased and more significant failure to correct penalties.