CH124500 - Offshore matters: penalties for enablers of offshore tax evasion or non-compliance: what 'involving offshore activity' means

Paragraph 2 of FA16/Sch24 makes reference to ‘involving offshore activity’.

‘Involving offshore activity’ means that a person has carried out an offshore activity that involves:

  • an offshore matter,
  • an offshore transfer, or
  • a relevant offshore asset move.

This section provides an introduction to offshore activity. It is recommended that you should also read CH100000 for full guidance on different types of offshore activity.

Offshore matter

Conduct involves an ‘offshore matter’ if it leads to a potential loss of revenue and that revenue is chargeable on or by reference to

  • income arising from a source in a territory outside the United Kingdom (UK),
  • assets situated or held in a territory outside the UK, or
  • activities carried on wholly or mainly in a territory outside the UK.

Offshore transfer

An ‘offshore transfer’ is deliberate conduct which leads to a potential loss of revenue where

  • income chargeable to income tax is received in, or transferred to, a territory outside the UK before the filing date - in relation to Paragraph 4AA of FA07/Sch24 (inaccuracy penalties), or
  • the proceeds of a disposal liable to capital gains tax are received in, or transferred to, a territory outside the UK before the filing date - in relation to Paragraph 4AA of FA07/Sch24, or
  • the disposition giving rise to the transfer of value by reason of which inheritance tax is chargeable is a transfer of assets and after the disposition, but before the filing date, the assets are transferred to territory outside the UK - in relation to Paragraph 4AA of FA07/Sch 24.

The filing date is the date on which the relevant document containing an inaccuracy is given to HMRC.

Relevant offshore asset move

A ‘relevant offshore asset move’ occurs if

  • an asset is moved from a ‘specified territory’ to a ‘non-specified territory’. (the definition of what is a ‘specified’ and a ‘non-specified’ territory is explained below)
  • the place of residence of a person who holds the asset moves from a ‘specified territory’ to a ‘non-specified territory’, or
  • there is a change in the ownership arrangements of an asset.

In each of the cases above, the beneficial owner of the asset prior to the asset move must remain the beneficial owner after the move.

Any second or later asset purchased with proceeds of sale from the original asset is treated as the original asset when determining whether a relevant offshore asset move has occurred.

Specified and non-specified territories

The list of ‘specified territories’ are set out in The Offshore Asset Moves (Specified Territories) Regulations 2015 (S.I. 2015/866). Eight new specified territories were added and two removed by The Offshore Asset Moves Penalty (Specified Territories) (Amendment) Regulations 2017 (S.I. 2017/989). Any territories not specified in these Statutory Instruments are ‘non-specified territories’.