HMRC's Requirement to Correct (RTC): The Final Deadline and Its Legacy

The Requirement to Correct (RTC) was one of the most significant pieces of offshore tax compliance legislation introduced in the UK in recent years. Introduced by the Finance (No. 2) Act 2017, it created a statutory obligation for UK taxpayers to correct any UK tax non-compliance relating to offshore matters — and it imposed dramatically higher penalties for those who failed to do so by the deadline of 30 September 2018.

Although the RTC deadline passed over six years ago, its legacy continues to matter in 2026. Anyone with undisclosed offshore tax liabilities from any period up to and including the 2016–17 tax year who has not yet come forward — or who is under HMRC enquiry — faces the significantly enhanced "failure to correct" (FTC) penalties that the RTC introduced. This guide explains what the RTC required, what happens if you failed to comply, and what options remain available.

What Was the Requirement to Correct?

The RTC was contained in Schedule 18 of the Finance (No. 2) Act 2017. It required UK taxpayers who had any of the following to correct their UK tax position by 30 September 2018:

• Offshore income: Foreign-source income not declared on UK tax returns for any year up to and including 2016–17
• Offshore assets: UK tax liabilities arising from assets held or income derived from assets outside the UK
• Offshore structures: Trusts, companies, and other arrangements outside the UK from which undisclosed UK tax liabilities arose

The scope was deliberately broad. It covered income tax, capital gains tax, and inheritance tax. It applied to any tax year in which HMRC could still open an assessment — which, given the extended time limits for offshore matters, could reach back 20 years in cases of deliberate evasion.

The obligation applied to taxpayers who:

1. Had a relevant UK tax liability (i.e., UK tax that should have been paid but was not), and
2. Were aware (or should have been aware) of the liability

The RTC was the UK government's response to the new international data-sharing environment created by CRS (Common Reporting Standard), FATCA (US-driven information exchange), and the Panama Papers revelations. HMRC made clear that the era of undisclosed offshore wealth was ending — financial data would flow automatically from over 100 jurisdictions, making previously invisible offshore accounts visible to HMRC. The RTC was designed to give taxpayers a window to regularise their position before that data arrived and before HMRC began systematic compliance action.

The "Failure to Correct" Penalties

The consequence of failing to meet the RTC deadline — that is, having an offshore tax liability that predates 2017–18 and not correcting it by 30 September 2018 — is the "failure to correct" (FTC) penalty. FTC penalties are substantially more severe than standard offshore penalties:

Standard FTC penalty: 200% of the potential lost revenue (PLR) — the amount of UK tax that should have been paid. This is the starting point, not the maximum.

Minimum FTC penalty: 100% of PLR. This is the floor even in the most favourable circumstances (unprompted disclosure with maximum mitigation).

Additional "asset-based" penalty: Where assets were held in a jurisdiction that was an exchange of information partner (basically, any jurisdiction with a CRS or FATCA agreement with the UK), and those assets were moved or restructured after 16 November 2016, an additional 10% of the asset value can be added to the FTC penalty.

Named and shamed: HMRC has the power to publish details of taxpayers with FTC penalties where the PLR exceeds £25,000. This "naming" power is separate from and in addition to the financial penalty.

Comparison with pre-RTC offshore penalties: Before the RTC, unprompted voluntary disclosure of offshore errors attracted penalties as low as 10% of unpaid tax (for careless errors relating to a "Category 1" territory, such as an EEA country or the USA). The FTC minimum of 100% makes post-RTC offshore non-compliance approximately 10 times more expensive for cooperative taxpayers.

Can FTC Penalties Be Reduced?

The FTC penalties can be reduced from the 200% maximum, but the minimum is 100% and is effectively a hard floor that cannot be mitigated further. Reductions are available based on:

Disclosure: If you make a full, accurate, and unprompted disclosure of the failure, the penalty can be reduced from 200% towards the 100% minimum. An unprompted disclosure is one made before HMRC has indicated it is looking into your affairs.

Co-operation: Helping HMRC to understand the full extent of the failure and providing comprehensive information reduces the penalty.

Seriousness: The degree of culpability matters. Was the failure careless (didn't know the rules), deliberate (knew the rules and chose not to comply), or deliberate and concealed (took active steps to hide the failure)?

Reasonable excuse: There is a "reasonable excuse" defence to FTC penalties, but it is extremely narrow. HMRC takes the position that not knowing about the RTC obligation is not a reasonable excuse — the duty was publicised and the obligation was universal.

The minimum 100% penalty means that even the most co-operative, unprompted discloser pays a penalty equal to the entire outstanding tax liability. Combined with the original tax and statutory interest (HMRC's late-payment interest rate is 7.75% from January 2026 — base rate plus 4%), the total cost of late disclosure under the FTC regime can easily exceed double the original tax owed.

Who Is Still at Risk?

Despite the 2018 deadline having passed, there are many individuals who remain exposed to FTC penalties in 2026. The key categories are:

Those who have never disclosed: Individuals with historical offshore income or gains from periods up to 2016–17 who have not yet come forward. As CRS data continues to arrive at HMRC, these individuals are increasingly likely to be identified.

Those who disclosed incompletely: Partial disclosures made through the Worldwide Disclosure Facility (WDF) may not cover all relevant years or income types. HMRC can raise additional assessments for amounts not disclosed, and the FTC penalty framework applies to the undisclosed amounts.

Those inheriting offshore positions: Executors and beneficiaries of estates may discover that the deceased held offshore assets with undisclosed UK income. The estate may face a FTC penalty on the IHT or income tax liability, in addition to the substantive tax and interest.

Those with complex structures: Offshore trusts, underlying companies, and multi-layer structures are areas where HMRC has significant intelligence from CRS and from previous disclosure campaigns. If the trust or company generated undisclosed UK tax liabilities in years up to 2016–17, the settlor, trustees, and beneficiaries may all have FTC exposure.

Those under HMRC enquiry: Once HMRC has opened an enquiry and indicated it is investigating your affairs, any disclosure you make is "prompted" — the full FTC penalty framework applies, with no reduction towards the 100% minimum for disclosure quality (since the minimum is already 100%).

The Window That Remains: The Worldwide Disclosure Facility

The WDF remains open as the primary route for regularising historical offshore tax liabilities, including those caught by the FTC regime. Making a voluntary disclosure through the WDF, even after the RTC deadline, still provides meaningful mitigation:

• It reduces the FTC penalty from 200% towards 100% (the minimum)
• It demonstrates co-operation, which HMRC takes into account in how it manages the disclosure
• It avoids the risk of HMRC opening a formal enquiry, which might lead to a criminal referral in the most serious cases

The key point is that even though the penalties under the FTC regime are severe, voluntary disclosure before HMRC contacts you is always better than waiting. An "unprompted" disclosure still attracts the minimum 100% penalty, while a "prompted" disclosure (after HMRC contact) starts at 150% or higher depending on the territory and type of failure.

The Assessment Window for Historic Offshore Liabilities

HMRC has extended time limits for offshore matters:

• 4 years from the end of the relevant tax year: standard window for careless errors
• 6 years: errors and extended offshore matters
• 12 years: income tax and CGT on offshore matters (since Finance Act 2019)
• 20 years: fraud and deliberate offshore concealment

The 12-year rule is particularly significant. As of 2026, HMRC can still open assessments for undisclosed offshore income and gains going back to 2013–14 in cases of carelessness, and to 2006–07 or earlier in cases of deliberate failure. The 12-year rule for offshore matters was introduced specifically because CRS data often arrives years after the events it describes, giving HMRC information about old offshore positions.

For taxpayers who assumed that old offshore positions were beyond reach, the extended time limits are a rude awakening. A failure to disclose offshore income from 2010 — prior to the RTC deadline — is still within HMRC's assessment window and potentially subject to FTC penalties.

The "Requirement to Correct" and Estate Planning

The RTC has specific implications in the context of inheritance:

The deceased's estate: If a person died with undisclosed offshore tax liabilities, the executors inherit the obligation to correct those liabilities. The FTC penalty for a late disclosure by an estate is assessed against the estate (reducing what passes to beneficiaries).

Trustees of offshore trusts: UK-resident trustees who failed to correct offshore trust income or IHT ten-year anniversary charges by the RTC deadline face FTC penalties. Non-UK-resident trustees may also have exposure depending on the facts.

Beneficiaries and settlors: Depending on the type of trust and the circumstances, beneficiaries who received distributions from offshore trusts with undisclosed income, or settlors who retained an interest in overseas structures, may each have separate FTC exposure.

Practical Guidance: What Should You Do?

If you believe you may have historical offshore tax liabilities that were not corrected by the RTC deadline:

1. Do not assume it is too late to matter. HMRC can assess back 12 or 20 years for offshore matters. The FTC penalties apply whenever the undisclosed liability is eventually discovered or disclosed.

2. Take professional advice immediately. The FTC penalty regime is complex, and the strategy for disclosure (through the WDF or otherwise) should be planned with a specialist tax adviser or solicitor. Do not attempt to manage this without professional support.

3. Gather records. Compile as much documentation as possible about the offshore income, assets, and structures in question. The more comprehensive the disclosure, the better the mitigation available.

4. Consider the WDF. A voluntary disclosure through the WDF, even after the RTC deadline, is almost always preferable to waiting for HMRC to open an enquiry. The minimum FTC penalty is 100% either way, but voluntary disclosure avoids the risk of escalation, criminal investigation, and HMRC's naming power.

5. Review estates and trusts. If you have recently inherited assets or become a trustee of an offshore structure, seek advice on whether any historical UK tax liabilities need to be corrected.

6. Do not take half-measures. An incomplete disclosure creates more problems than it solves. The disclosed amounts are treated as "corrected" and attract the lower penalty; the undisclosed amounts are treated as "prompted" disclosures when HMRC finds them and attract the full FTC penalty.

HMRC's Enforcement Trajectory

HMRC's offshore compliance activity has consistently intensified since the introduction of CRS. Each year, more data arrives from more jurisdictions, covering more tax years. The number of countries participating in CRS increased from 53 in 2017 to over 100 by 2023. The Crypto-Asset Reporting Framework (CARF) will add cryptocurrency data from 2027.

For taxpayers with historical offshore issues, the question is not whether HMRC will eventually have the information — it is whether HMRC will identify the issue before or after the taxpayer comes forward. The former is now the significantly more expensive outcome.

How Global Investments Can Help

Global Investments works with clients on all aspects of international wealth management, including ensuring that their financial arrangements are structured correctly and compliantly. We do not provide tax advice directly, but we have an established network of specialist UK tax solicitors and accountants who handle WDF disclosures, FTC penalty negotiations, and historical offshore compliance matters.

If you have concerns about historical UK tax obligations relating to offshore assets, income, or structures, we can facilitate a confidential introduction to the appropriate specialist. Contact our team to start that conversation.

This article is for general information only. Nothing here constitutes legal or tax advice. The RTC and FTC regime is complex, and individual circumstances vary significantly. Always seek specialist professional advice before taking any action in relation to historical tax liabilities. Disclosure decisions carry serious financial and legal consequences.