On 19 February 2018 HMRC issued a consultation document entitled ‘Extension of Offshore Time Limits’. This follows an announcement in the Autumn Budget 2017 that the time limit in relation to non-deliberate offshore compliance would be increased to a period of at least twelve years after the end of the relevant tax year or period. In the case of deliberate non-compliance there is already a time limit of twenty years and this will remain the same. Interested parties are invited to comment on the proposals in the consultation document by 14 May 2018.

HMRC are requesting views on the design principles for legislation to implement a new minimum tax assessment time limit of twelve years to make assessments or notices of determination in cases involving offshore income, gains or chargeable transfers. The time limit is being extended because it can take much longer to establish the facts about offshore transactions, particularly where they involve complex offshore structures. HMRC therefore needs more time to investigate situations where the current assessment time limits of four and six years for offshore non-compliance are not long enough to establish the facts and determine and assess the amount of tax due.

Information gathering on offshore non-compliance may need the cooperation of other jurisdictions and this can take time. This gives HMRC less time in which to establish the tax due before the case is out of time for assessment. As a result HMRC believes that there can be unpaid tax in some cases but this cannot be collected because it is too late to make an assessment.

The new legislation would therefore introduce an assessment time limit of twelve years where there are mistakes or non-deliberate errors involving offshore tax. Assessments relating to income tax, capital gains tax and inheritance tax would be within the scope of the new rules. The UK government is also considering applying the proposals to corporation tax and is inviting comments on this.

As the time limits for assessing penalties are based on when a tax assessment is made the increase in the time limit for tax assessment means that more tax periods will also be potentially subject to penalties.

The proposed starting date for the new time limits would be 1 April 2019 for inheritance tax and (if applicable) corporation tax. The starting date would be 6 April 2019 for income tax and capital gains tax. The new legislation would not apply retrospectively so any year for which the time limit has expired before 6 April 2019 would not be affected.