HMRC eyes 12-year window on offshore tax assessments

Plans to lengthen to 12 years the time limit HMRC has to raise a tax assessment on the offshore investments of taxpayers who have taken ‘reasonable care’ have been slammed.

The Low Incomes Tax Reform Group says the plans target taxpayers who’ve made innocent mistakes, in a proposal that it says reduces protection for those who have acted in good faith.  

That’s’ because the time limits – currently four years if reasonable care was taken -- exist in order to provide a taxpayer with closure and certainty over their affairs, LITRG said.

But it apparently takes British tax officers longer to “establish the facts” in offshore cases, HMRC has said, justifying the proposal, which was already broadly set when consultation on it began.

HMRC said: “More time is needed to address situations where the current assessment time limits of 4 and 6 years for offshore non-compliance are not long enough to establish the facts, and determine and assess the amount of tax due.”

The Chartered Institute of Taxation isn’t convinced; and has condemned the proposal as “wrong in principle.”

The institute also said: “There is no evidential explanation in the consultation document of the more detailed rationale behind the measure (that it takes longer to investigate, or that the extra time needed is six years for careless errors and eight years for innocent errors).

“HMRC should publish the analysis they have carried out on which they have based their decision to extend time limits in this way.”

The ‘12-year’ proposal comes on top of (and is unaffected by) the Revenue’s power to go back six years where taxpayers have been careless, which rises to 20 years where it suspects taxpayers have deliberately evaded tax.