New penalty regime for overseas taxes.New Penalty Regime – Overseas Income comes in on 30th September 2018


HMRC believes that there are UK citizens who are avoiding tax on the income on assets (e.g. rental property, bank balances, investments, etc) that they have ‘hidden’ abroad.

For those that are caught the future penalties will be much higher than what they currently are. Below is a summary of the new penalty regime that is about to come into force.

What is this new penalty regime ?

From 30th September 2018 a new (and quite frankly draconian) penalty regime comes in for anyone is found to have undeclared foreign income and has therefore avoided paying tax.

Depending on circumstances a taxpayer could be faced with up to THREE PENALTIES and each one is pretty severe.

Each one would be payable in addition to any unpaid tax.

Penalty 1 : Income Penalty

The standard penalty is a whopping 200% of the tax due.

This can come down if a taxpayer helps HMRC with their enquiries BUT, even so, the absolute minimum penalty is still 100% of the tax due.

Penalty 2 : Asset Based Penalty

This additional penalty applies when the following 3 criteria are met:-

  • the tax exceeds £25,000 in any tax year
  • you knew that by not reporting overseas income you were not complying with the law
  • you did not correct it

The standard penalty is 10% of the value of the assets connected to the income that wasn’t reported.

E.g. If the rent on a foreign holiday home (worth say £1m) wasn’t reported and these 3 criteria were met then the resulting standard asset based penalty would be £100,000 (Being 10% of £1m).

Penalty : 3 Offshore Asset Moves Penalty

This second additional penalty applies where it can be shown that you moved assets to avoid having details reported to HMRC under international agreements on exchange of information.

The standard penalty is 50% of the amount of the income penalty.

Immediate Action

With these penalties being so BIG it is imperative that every taxpayer double checks their finances and makes sure that ALL their overseas income has been correctly declared.

This isn’t an exhaustive list but typical sources of overseas income that may have been inadvertently overlooked include:-

  • Renting holiday homes (or other property)
  • Bank interest in overseas bank accounts
  • Foreign pensions
  • Dividends on shares and other investments
  • Sale of overseas assets (eg property, investments, etc)
  • Tax avoidance schemes


What happens if I discover that I may have previously undeclared overseas income

You need to tell your advisor/accountant immediately.

Once they know they can then advise you what the best next steps should be.

If HMRC are told about any previously unreported overseas income before 30th September 2018 then we expect the new penalty regime will not apply (can’t be guaranteed though).


Will I be caught ?

There will be some UK taxpayers who won’t to pay tax and will be saying to themselves ‘…but what are the chances of me being caught…?’

In our opinion, the chance of being caught are rising – you may not know that over recent years HMRC has been actively finding out who has bank accounts in a growing list of countries.  In any case it is technically Tax Evasion and therefore against the law!


And finally….

I believe these new penalties are targeting wealthy taxpayers who HMRC believe have ‘hidden’ some of their assets overseas in order to avoid paying tax in the UK.

Unfortunately, these new and severe penalties apply to EVERYONE so it is more important than ever that you tell your advisor/accountant about any possible overseas assets and income that you may have so that they can help and give you the right tax advice.


With the 30th September deadline fast approaching you need to act now before it’s too late!!


It is important that you take professional advice before making any decisions based on the information that you learnt here. While every effort has been made to make sure it is accurate it cannot be precisely tailored to your personal circumstances.This article is for general information only and no action should be taken, or refrained from, as a result of this information.  Professional advice should be taken based on specific circumstances in each individual case.  Whilst we endeavour to ensure that the information contained in the article is correct, no liability  will be accepted by KMA Accountancy which is a trading name of Kim Marlor Associates Ltd or damages of any kind arising from the contents of this communication, or for any action, inaction  or decision taken as a result of using any such information.


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