Offshore time limit change 'unnecessary and undesirable' say Lords

Lord Forsyth has written to the Chancellor on the subject of the changes to offshore time limits, expressing misgivings about the lack of consultation at early stages and the impact it will have on honest taxpayers

Describing the measure as ‘unnecessary and undesirable’, the chair of the House of Lords economic affairs finance bill sub-committee wrote to Philip Hammond to express his opinions about the extension to offshore time limits, based on evidence taken from witnesses who appeared before the committee. He recommended that the amendment be withdrawn from the Finance Bill and that the government ‘start a fresh dialogue with representatives of tax professionals’.

On the subject of offshore time limits he wrote: ‘There was deep and consistent opposition to this measure from witnesses to our inquiry, primarily because the impact would extend beyond the high net worth individuals at whom one might expect it was targeted’. Made reference to concerns raised by the Low Income Tax Reform Group (LITRG) that many of the individuals affected by the change of the time limits to 12 years ‘would be elderly people on low incomes’.

He took issue with the fact that ‘HMRC did not consult at the first stage of policy-making - setting out objectives and identifying options’. Instead, he said, HMRC began consultation at the second stage, once it had decided that the extension was the best option for change.

The way that the time limit was decided at 12 years raised questions. He noted that HMRC’s explanation was that ‘offshore matters are complex and take a long time to resolve’. He drew on the opinion of Pinsent Masons LLP, who had, according to Lord Forsyth, said that ‘”Offshore” does not equal complexity in the drafting of this measure, having a holiday home, shares in an overseas listed company, an overseas bank account or small pension would be enough to bring a taxpayer within its scope’.

He said that now that the common reporting standard (CRS) had been adopted by over 100 countries, ‘it should be more straightforward for HMRC to obtain any information it needs from overseas tax authorities. It is therefore difficult to understand why this proposal has been brought forward now’. He also noted that in determining the time limit at 12 years, ‘there was no consideration in the consultation of alternative time periods’.

This time limit, he noted, ‘would treble the normal time limit for compliant taxpayers and double the limit for those who fail to take reasonable care. In doing so it would remove the distinction between fully compliant and careless taxpayers, which makes the existing time limits proportionate’.

He made reference to a suggestion by the Association of Taxation Technicians (ATT) that the legislation be amended to exclude from the extended time limits ‘those taxpayers who have made all the necessary information available to HMRC at the appropriate time’. He noted that such an exclusion was available in circumstances when information was received from an overseas tax authority for this purpose, but not when information is provided by a taxpayer.

The committee is due to issue two reports in the coming weeks, and Lord Forsyth said that he hoped this early warning will allow the Treasury ‘sufficient time to bring forward amendments in the House in response to our recommendations’.

Report by James Bunney

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