The 'Requirement to Correct' and 'Failure to Correct'

February 09, 2018


Speed read

  • The Requirement to Correct (RTC) is a new piece of legislation designed to compel taxpayers to review their offshore interests and correct any UK tax irregularities by 30 September 2018. 
  • After 30 September 2018 taxpayers (including non UK resident trustees and non-resident landlords) that have ‘Failed to correct’ will be subject to a range of significant penalties.
  • PwC advise taxpayers to review their offshore tax affairs now to ensure they are compliant, as these measures will apply even where there was no intention not to comply.


The Requirement to Correct (RTC) is a new piece of legislation contained in Finance Act (No2) 2017.  It is designed to compel taxpayers to review their offshore interests and correct any UK tax irregularities by 30 September 2018 or face new severe penalties.

HMRC expects any ‘correction’ made under the RTC to cover any outstanding UK tax liabilities that are ‘in date’ for assessment under the normal rules for tax assessment (4 years for errors made despite taking reasonable care, 6 years for careless errors and 20 years for deliberate errors).

Importantly, HMRC will have increased timeframes for assessing taxpayers’ liabilities to tax under the RTC.  If it were the case that an assessment time limit would expire in the period between 6 April 2017 and 5 April 2021, the relevant time limit is extended to finish on 5 April 2021.

The increased enquiry window, coupled with the increased information HMRC will receive under CRS and their continued focus on offshore compliance, may increase the likelihood of an enquiry.


Where a taxpayer fails to correct an error within the statutory window, the new regime will impose the following penalties:

  • A penalty of between 100% and 200% of the tax.  The penalty will apply regardless of the reason for the error.
  • Potential asset based penalty of up to 10% of the value of the relevant asset where the tax at stake is over £25,000 in any tax year
  • Potential “naming and shaming” where over £25,000 of tax per investigation is involved
  • A potential additional penalty of 50% of the amount of the standard penalty, if HMRC could show that assets or funds had been moved to attempt to avoid the RTC
  • The RTC and FTC applies to anytax error arising from offshore financial interests – it is not limited to those who have deliberately failed to pay the right amount of tax. The regime applies to anyone who has UK tax liabilities, which would include non UK resident trustees and non-resident landlords.

What if an error is discovered? 

If an error is discovered it should be disclosed to HMRC. There is no prescribed route for disclosures under the RTC regime and the method of disclosure will depend on the circumstances in each case. Taxpayers and their advisors should seek advice form a tax dispute specialist. 

Action points

  1. Anyone with offshore interests should review their affairs to ensure they have been and will continue to be fully tax compliant.
  2. Advisers should be discussing these developments with their clients to make them aware of the potential penalties.
  3. Where errors are identified, a disclosure should be made to HMRC as soon as possible.

If you believe the RTC will impact you or any of your clients, or would like an impartial second opinion, please contact a member of our experienced Tax Disputes Team or your usual PwC contact for an initial free conversation.


Natalie Martin

Stephen Camm

Matt Taylor

Jon Preshaw

Iain Sanderson

Ben Roseff