Since the 2017 to 2018 tax year, sections 106B to 106D of the Taxes Management Act 1970 make it a criminal offence to fail to notify chargeability, fail to file a return or file an inaccurate return where more than £25,000 of income tax and capital gains tax for the year relates to offshore income, assets or activities. HMRC does not have to prove intent; the person must instead prove a reasonable excuse or, for an inaccurate return, that they took reasonable care.

What are the three offences?

The offences were inserted into the Taxes Management Act 1970 (TMA) by section 166 of the Finance Act 2016. They came into force on 7 October 2017 and apply to the tax year that began on 6 April 2017 and later years. Section 166(4) of the Finance Act 2016 confirms they do not reach notices or returns for earlier years.

Section The failure When it is judged
106B Not giving notice of chargeability under section 7 TMA At the end of the notification period
106C Not delivering a return required by a notice under section 8 TMA At the end of the withdrawal period
106D Delivering a return containing an inaccuracy that understates offshore tax At the end of the amendment period

In each case the offence is committed only where the tax involved is chargeable on or by reference to offshore income, assets or activities and the amount exceeds the threshold.

Why is it called strict liability?

Compare the long standing offence in section 106A TMA, which requires a person to be knowingly concerned in the fraudulent evasion of income tax and carries up to 14 years’ imprisonment on indictment. Sections 106B to 106D contain no requirement to show fraud, knowledge or intent. The prosecution needs to show the failure, the offshore connection and that the threshold was exceeded. The defences then put the burden on the accused: the statute says it is a defence for the person “to prove” a reasonable excuse or reasonable care.

What counts as offshore income, assets or activities?

Section 106F(4) defines the phrase as:

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

“Assets” takes its meaning from section 21(1) of the Taxation of Chargeable Gains Act 1992 but section 106F(5) adds that it includes sterling. So sterling cash held in an overseas bank account is within scope.

How is the £25,000 threshold worked out?

Section 106F(2) says the threshold set by regulations cannot be less than £25,000. Regulation 3 of the Sections 106B, 106C and 106D of the Taxes Management Act 1970 (Specified Threshold Amount) Regulations 2017 (SI 2017/988) sets it at £25,000 for each tax year. It is measured differently for each offence:

  • Section 106B: the offshore tax is calculated using the potential lost revenue rules in paragraphs 7 and 11 of Schedule 41 to the Finance Act 2008 (regulations 5 and 6).
  • Section 106C: it is the offshore liability that an accurate return would have shown (regulation 7).
  • Section 106D: it is the increase in offshore tax from correcting the inaccuracy, calculated under paragraphs 5 to 7 of Schedule 24 to the Finance Act 2007 as if the inaccuracy were careless (regulations 8 and 9).

The most important limitation is the exclusion in regulation 2. Tax on offshore income, assets or activities that, at the time of the event giving rise to it, is reportable to HMRC under the Common Reporting Standard arrangements with the territories listed in the Schedule to the regulations, or under article 8 of Council Directive 2011/16/EU, does not count towards the threshold. The offences are therefore aimed at offshore tax HMRC would not routinely learn about through automatic exchange of information.

When is each offence committed?

  • Failure to notify. The notification period under section 7(1C) TMA is normally six months from the end of the tax year, so 5 October. If a notice to file was issued and then withdrawn, it is the later of that date and 30 days after the withdrawal.
  • Failure to file. The withdrawal period under section 8B(6) TMA is two years beginning with the end of the tax year, or a longer period HMRC sets in exceptional circumstances. A return filed late but within that period does not commit the section 106C offence, although civil late filing penalties still apply.
  • Inaccurate return. The amendment period under section 9ZA TMA ends 12 months after the filing date. A return corrected by amendment within that window does not commit the section 106D offence.

Section 106F(1) adds that if HMRC, the tribunal or an officer extends one of these periods under section 118(2) TMA, the extended deadline applies.

What defences and exclusions are there?

For failure to notify (section 106B(2)) and failure to file (section 106C(2)) it is a defence to prove a reasonable excuse for the failure. For an inaccurate return, section 106D(2) instead provides a defence of proving that the person took reasonable care to ensure the return was accurate. Our pages on reasonable excuse and reasonable care when relying on an adviser explain how those tests are usually approached in the civil penalty context.

Section 106E(1) excludes anyone required to notify or file in their capacity as a relevant trustee of a settlement or as the executor or administrator of a deceased person. The offences are aimed at individuals dealing with their own tax.

What are the possible sentences?

The offences are summary only: section 106G sets penalties on summary conviction and provides for no trial on indictment. A person convicted is liable:

  • in England and Wales, to a fine, imprisonment for up to 51 weeks, or both; and
  • in Scotland or Northern Ireland, to a fine not exceeding level 5 on the standard scale, imprisonment for up to six months, or both.

A conviction displaces the matching civil penalty for the same failure. Paragraph 21 of Schedule 24 to the Finance Act 2007, paragraph 23 of Schedule 41 to the Finance Act 2008 and paragraph 26 of Schedule 55 to the Finance Act 2009 each say a person is not liable to the civil penalty for a failure or inaccuracy for which they have been convicted. The tax and interest remain due either way. Where HMRC chooses civil treatment instead, the higher offshore penalties apply.

How might it apply?

Illustration only. Priya has investment income and a gain from assets held overseas in a tax year. She has never filed a Self Assessment return and does not tell HMRC by 5 October. Assume none of the income or gain is reportable to HMRC under the exchange arrangements in SI 2017/988.

  • If the offshore tax for the year is £18,000, the section 106B offence is not committed, though civil failure to notify penalties can still apply.
  • If the offshore tax is £30,000, the threshold is exceeded and the offence is complete when the notification period ends, unless Priya can prove a reasonable excuse.
  • If the same tax related to an account reportable under the Common Reporting Standard, it would be left out of the threshold calculation.

What do people get wrong?

  • Thinking there must be dishonesty for a prosecution. That is the section 106A offence; these offences need none.
  • Applying the threshold to income rather than tax. The £25,000 is the offshore income tax and capital gains tax for the year.
  • Forgetting the exclusion for tax reportable under the Common Reporting Standard, which can take a case below the threshold.
  • Assuming a late correction always avoids the offence. Section 106D looks at the position when the amendment period ends, so a later disclosure through the Worldwide Disclosure Facility deals with the tax but does not change the fact that the offence conditions were met when the period ended.
  • Assuming executors are caught when they file returns for a deceased person. Section 106E excludes them.

For how HMRC decides between civil and criminal routes generally, see criminal tax investigations.

If HMRC opens a check into your return, tax investigation insurance pays your accountant’s fees. Solar Protect cover pays up to £100,000 with no excess; it never pays tax, interest or penalties. Read how our cover works or get a quote.

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Reviewed by Christine Anderson, Broker, Solar Protect. Last reviewed 19 October 2026. Part of Accountapedia, the Solar Protect guide to UK tax and accounting. This page is general information, not personalised advice.