HM Revenue & Customs (HMRC) has announced new penalties for offshore non-compliance.
These new penalties come into force from 6 April 2011 and apply to Income Tax and Capital Gains Tax. The first Self Assessment returns affected will be for the 2011-12 tax year, with paper returns due to be filed by 31 October 2012, and electronic returns by 31 January 2013.
The legislation can be found in Schedule 10 of Finance Act 2010.
How it works
The new penalty is an enhancement of the penalties for
- failure to notify
- inaccuracy on a return
- failure to file a return on time
Under the new legislation, these penalties will be linked to the tax transparency of the territory in which the income or gain arises. Where it is harder for HMRC to get information from another country, the penalties for failing to declare income or gains arising in that country will be higher.
There will be three new levels of penalty:
- where the income or gain arises in a territory in 'category 1', the penalty rate will be the same as under existing legislation
- where the income or gain arises in a territory in 'category 2', the penalty rate will be 1.5 times that in existing legislation - up to 150 per cent of tax
- where the income or gain arises in a territory in 'category 3', the penalty rate will be double that in existing legislation - up to 200 per cent of tax
The Treasury has laid legislation before Parliament which describes which territories are in 'category 1' and 'category 3'. All other territories (except the UK) are in 'category 2'.
| Category 1 | Category 3 |
|---|---|
| Anguilla | Albania |
| Aruba | Algeria |
| Australia | Andorra |
| Belgium | Antigua and Barbuda |
| Bulgaria | Armenia |
| Canada | Bahrain |
| Cayman Islands | Barbados |
| Cyprus | Belize |
| Czech Republic | Bonaire, Sint Eustatius and Saba |
| Denmark (not including Faroe Islands and Greenland) | Brazil |
| Estonia | Cameroon |
| Finland | Cape Verde |
| France | Colombia |
| Germany | Congo, Republic of the |
| Greece | Cook Islands |
| Guernsey | Costa Rica |
| Hungary | Curaçao |
| Ireland | Cuba |
| Isle of Man | Democratic People's Republic of Korea |
| Italy | Dominica |
| Japan | Dominican Republic |
| Korea, South | Ecuador |
| Latvia | El Salvador |
| Lithuania | Gabon |
| Malta | Grenada |
| Montserrat | Guatemala |
| Netherlands (not including Bonaire, Sint Eustatius and Saba) | Honduras |
| New Zealand (not including Tokelau) | Iran |
| Norway | Iraq |
| Poland | Jamaica |
| Portugal | Kyrgyzstan |
| Romania | Lebanon |
| Slovakia | Macau |
| Slovenia | Marshall Islands |
| Spain | Mauritius |
| Sweden | Micronesia, Federated States of |
| United States of America (not including overseas territories and possessions) | Monaco |
| Nauru | |
| Nicaragua | |
| Niue | |
| Palau | |
| Panama | |
| Paraguay | |
| Peru | |
| Saint Kitts and Nevis | |
| Saint Lucia | |
| Saint Vincent and the Grenadines | |
| San Marino | |
| Seychelles | |
| Sint Maarten | |
| Suriname | |
| Syria | |
| Tokelau | |
| Tonga | |
| Trinidad and Tobago | |
| United Arab Emirates | |
| Uruguay |
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