As previously discussed here HMRC have been targeting taxpayers who they believe have overseas income and gains, which may not have previously been disclosed.
We refer to these as the ‘offshore income and gains’ letters.
The letters being sent by HMRC are in response to information received from overseas jurisdictions with who the UK has entered into information exchange agreements. The agreements entered into are known as Automatic Exchange of Information (AEOI) agreements, the Common Reporting Standard (CRS), the United States Foreign Account Tax Compliance (FATCA), Crown Dependencies and Overseas Territories (CDOTs).
Since out last update we have assisted several taxpayers in responding to these letters, first by reviewing their overseas income and assets and then where necessary making a disclosure to HMRC using the ‘Worldwide Disclosure Facility’ (“WDF”).
Our reviews will sometimes find that a disclosure is not required and that the clients affairs are in order, but we are also finding that cases where income or gains have not been declared and action is required.
In practice we are finding that the letters have been received in connection with income producing “assets” held in Germany, the US, Switzerland, Isle of Mann and the Channel Islands. This is likely to be just a coincidence, as these locations will be some of the most likely for overseas assets to be legitimately situated.
Once HMRC have been notified you will make a disclosure using the WDF it is important that this is dealt with properly and on time.
Professional advice is crucial to manage this process properly.
We will ensure the correct number of years are disclosed to HMRC, as this can vary depending on the circumstances and it is important you do not report more than you are required to.
A thorough review of all overseas income and gains is then required to ensure everything is reported properly.
It is then also important to consider the taxpayers penalty position.
It is clear that HMRC are taking a tough stance on penalties and will seek to apply penalties of 100-200% depending on circumstances and only accepting penalties below these levels where the taxpayer has a a reasonable excuse (with reference to their published guidelines). We can help review your circumstances and consider whether you have a reasonable excuse.
If you have received an ‘offshore income and gains’ letter from HMRC please contact us in the first instance and we can discuss your situation and assess how we can help.