Autumn Budget 2018 – International tax enforcement: disclosable arrangements

At present, there are no obligations on the administrators of complex offshore arrangements involving trusts, companies and similar legal entities to disclose their existence to HMRC. Taxpayers are able to take advantage of these structures to operate businesses and manage wealth, whilst remaining invisible to the tax authorities.

The government proposes to introduce measures to ensure that the creators of such offshore structures have an obligation to notify HMRC of their creation. In their consultation document of 5 December 2016, HMRC proposed to tackle these structures through use of a ‘DOTAS’ style system, under which the business, agents, advisers or any other person who creates an offshore arrangement for a UK taxpayer with certain characteristics, would be required to notify them to HMRC. These arrangements would be issued with an identification number and the UK taxpayer would be obliged to disclose their use of the arrangement by including this number on their personal return. The main difference between this scheme and DOTAS is that there would be no requirement for the arrangement to provide a tax advantage. The proposal includes a penalty regime for those failing to comply with the requirement.

This proposal will affect businesses and private individuals using offshore structures to as part of business or private wealth management arrangements, whose arrangements may be made visible to HMRC for the first time. Groups who will particularly be affected are non-domiciled remittance-basis users, using structures to ensure tax-efficient remittances to the UK and multi-jurisdictional businesses with UK-based shareholders. These parties should expect increased scrutiny from HMRC.