The requirement to correct legislation also introduces significantly higher penalties for people who have accounts offshore where they get their tax affairs wrong (whether intentionally or accidentally).
Where HMRC decide to enquire into the tax affairs of someone with overseas links then they will generally do this under Code of Practice 8 as their suspicion will be that the person has undertaken some form of planning to mitigate their UK tax exposure and to take advantage of their domicile or residence position. Often people will have instigated legitimate tax planning which is not updated and due to changes in the law now no longer works. There are usually significant sums potentially at stake and it is important (and stressed in the leaflet COP 8) that people take professional advice.
It should be stressed that COP 8 has no legal construct and that it does not provide HMRC with any special powers and therefore HMRC should be held to what the law says that they can and cannot do.
The COP 8 leaflet suggests that an individual should provide HMRC with all of the information they require, meet with HMRC to discuss matters at an early stage to enable HMRC to ask questions and clarify points. This is not always the best approach as it can lead to long and intrusive tax investigations and unfortunately HMRC generally look for evidence to support their view rather than forming a view after objectively reviewing the evidence.
HMRC state that generally as part of the COP 8 procedure they will tell the individual the reasons for starting the investigation. This is true but the explanation is usually very vague and open to interpretation.
If, as part of the COP 8 process HMRC come to the opinion that an individual has deliberately not paid sufficient tax and knew that the tax returns were incorrect when submitted they potentially will withdraw COP 8 and issue Code of Practice 9 (cases of suspected tax fraud) or at worst decide to prosecute the individual.
Read more about Code of Practice 8 (COP8).
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