The 12 year time limit for offshore tax

HMRC can assess income tax and capital gains tax up to 12 years after the end of the tax year where the lost tax involves an offshore matter, or an offshore transfer that made it significantly harder to spot, under section 36A of the Taxes Management Act 1970. From 2015/16 it applies even if you took reasonable care. It does not apply where HMRC already had information from an overseas tax authority in time to assess within the normal limits, or to transfer pricing adjustments, and inheritance tax has a parallel rule.

Where does the 12 year limit come from and which taxes does it cover?

Section 80 of the Finance Act 2019 inserted section 36A into TMA 1970 for income tax and capital gains tax, and section 81 made the equivalent change for inheritance tax by inserting section 240B into the Inheritance Tax Act 1984. HMRC’s Compliance Handbook at CH53100 confirms that the 12 year limit applies only to income tax, capital gains tax and inheritance tax. Corporation tax is not covered, so a company’s offshore income stays within the usual 4, 6 and 20 year limits.

The 12 year limit sits between the 6 year limit for careless behaviour and the 20 year limit for deliberate behaviour. Section 36A(2) makes it subject to section 36(1A), so where behaviour is deliberate the 20 year limit still applies.

Which tax years can HMRC reach?

CH53560 sets out the commencement rules for income tax and capital gains tax:

Tax year	When the 12 year limit applies
2012/13 and earlier	Never
2013/14 and 2014/15	Only if the loss resulted from carelessness by you or someone acting for you
2015/16 onwards	Whether or not you took reasonable care

CH53560 gives worked dates. The time limit for 2013/14 ran out on 5 April 2026. On HMRC’s figures, careless offshore errors for 2014/15 can be assessed until 5 April 2027, and offshore errors for 2015/16 where there was no carelessness can be assessed until 5 April 2028.

What counts as an offshore matter?

Under section 36A(3), lost tax involves an offshore matter if it is charged on or by reference to:

• income arising from a source outside the UK, such as interest on an overseas bank account;
• assets situated or held outside the UK, such as overseas property or shares held through a foreign broker;
• income or assets received outside the UK;
• activities carried on wholly or mainly outside the UK; or
• anything having effect as if it were one of these.

“Assets” takes its capital gains tax meaning but also includes sterling (section 36A(10)). CH53520 warns that these definitions differ from those used for offshore penalties: income received outside the UK is an offshore matter for the time limit but an offshore transfer for penalty purposes. Our page on offshore penalties covers those rules.

What is an offshore transfer?

An offshore transfer catches UK source income or gains that are moved abroad. Under section 36A(4) and (5), lost tax involves an offshore transfer if it does not involve an offshore matter, and the income or disposal proceeds (or assets representing them) are transferred outside the UK before the relevant date. That date is when the return for the year was delivered or, if no return was delivered, 31 January after the end of the tax year.

The 12 year limit then only applies if the transfer made the lost tax significantly harder to identify, which section 36A(6) says includes HMRC being significantly less likely to become aware of it, or likely to become aware only significantly later. CH53540 gives the example of a German resident landlord whose UK rents are swept to a German account on the day they arrive, so HMRC receives no UK interest data or Common Reporting Standard data.

When do the shorter limits still apply?

Section 36A(7) blocks the 12 year limit where, before the normal 4 or 6 year limit expired, HMRC received “relevant overseas information” from which it could reasonably have been expected to become aware of the lost tax, and it was reasonable to expect HMRC to assess within that time. Relevant overseas information means information provided by an overseas authority under EU law or an international agreement (section 36A(8)). CH53550 says this includes Common Reporting Standard data and treaty exchanges.

CH53550 gives three examples:

• HMRC received accurate data identifying an undeclared Jersey account for several years but failed to match it to the taxpayer’s returns. The exclusion applies and HMRC is restricted to 4 years.
• HMRC received data on one overseas account that matched the return, but a second account was not reported. The partial data did not make the loss discoverable, so 12 years remains available.
• Information supplied by the taxpayer during an enquiry is not relevant overseas information, because it did not come from an overseas authority.

Section 36A(9) also excludes tax arising from a transfer pricing adjustment under Part 4 of the Taxation (International and Other Provisions) Act 2010.

Does HMRC still need a valid discovery?

Yes. Section 36A is a time limit, not a separate power to assess. Where you filed a return, HMRC still has to meet one of the conditions in section 29: carelessness by you or someone acting for you, or that an officer could not reasonably have been aware of the shortfall from the information made available. A clear white space disclosure of the overseas item can therefore still help where you were not careless.

How does the rule work for inheritance tax?

CH53510 explains that for inheritance tax HMRC can bring proceedings for lost tax within 12 years of the later of the date the tax (or last instalment) was paid and accepted, or the date it became due. The offshore matter test looks at property situated or held outside the UK at, or immediately after, the chargeable transfer. The rule applies to chargeable transfers from 1 April 2015 even where nobody was careless, and to transfers from 1 April 2013 to 31 March 2015 only where the loss resulted from carelessness. Relevant overseas information blocks it in the same way.

How might this work in practice?

Illustration only. Helen, a UK resident, has had a Spanish holiday flat since 2014 and has never declared the rent, believing that paying Spanish tax was enough. HMRC writes to her in November 2026. The rent is an offshore matter. For 2015/16 onwards HMRC can assess within 12 years of each tax year end even if she took reasonable care. If HMRC shows she was careless, it can also assess 2014/15 provided it does so by 5 April 2027. If HMRC had received Spanish data in time to assess within the normal limits and simply failed to act on it, those limits would apply instead.

What mistakes do people make?

• Assuming that paying foreign tax means nothing needs to be reported in the UK.
• Thinking any information HMRC holds limits it to 4 or 6 years. Only information from an overseas authority counts.
• Applying the 12 year rule to companies. Corporation tax is outside it.
• Forgetting that UK rent or sale proceeds sent abroad can be an offshore transfer.
• Ignoring the older years: careless 2014/15 errors can be assessed until 5 April 2027.

To put things right, see our pages on the Worldwide Disclosure Facility and the Digital Disclosure Service, and how far back HMRC can go.

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• Is there a time limit for prosecuting tax fraud
• Is there a time limit on HMRC collecting a debt
• Deferred tax: IAS 12 vs FRS 102
• VAT assessment time limits and the one year rule

Sources

• GOV.UK: Manual page CH53100
• legislation.gov.uk: Act 1970 c. 9, section 36A
• GOV.UK: Manual page CH53560
• GOV.UK: Manual page CH53510
• GOV.UK: Manual page CH53520
• GOV.UK: Manual page CH53540
• GOV.UK: Manual page CH53550
• legislation.gov.uk: Act 1970 c. 9, section 29

Reviewed by Christine Anderson, Broker, Solar Protect. Last reviewed 24 October 2026. Part of Accountapedia, the Solar Protect guide to UK tax and accounting. This page is general information, not personalised advice.