HMRC “Offshore” letters and “certificates of tax position”

HMRC are writing to individuals in the UK; in cases where they have received intelligence about offshore income, gains, or investments from over 100 overseas tax authorities under Automatic Exchange of Information (AEOI) agreements.  Prior to sending the letters the taxman carries out some additional checks and risk assessments.

What do the letters say?
As the AEOI data is flowing in from overseas fairly constantly, HM Revenue and Customs’ Risk and Intelligence Service, Offshore unit are sending out batches of letters at regular intervals.

The letters use standard boiler-plate wording; although they do occasionally differ (as HMRC experiment with the wording to improve their “hit-rate”).  The letters typically state that the department has information showing the recipient has received income or gains arising overseas, but which is taxable in the UK. They suggest that the recipient should get guidance: although where the taxpayer already has a designated agent they are sent a copy.

The individual is told to respond within 30 days. The letters usually include a “Certificate of Tax Position” form.  This has to be completed – whether or not they have additional tax liabilities to declare.  The certificate warns that a false statement could result in investigation and prosecution.

The recipient has to tick that either: (a) They will make a disclosure of irregularities through the Worldwide Disclosure Facility (WDF); or (b) “I have declared all of my offshore income, assets and gains which are taxable in the UK”.

What does it mean for me?
Firstly, unless a rare mistake has been made about your identity, then HMRC do actually have genuine information about you: received from overseas.

However, HMRC are saying that you have overseas income, or gains, or assets.  This does not necessarily mean your tax return is wrong, or that you owe more tax.  But, as the tax office will have done some preliminary checking of your affairs; it is clear that the taxman suspects you have not declared all of your taxable income or gains.  They are giving you a chance to come forward and sort things out: without putting you through the rigours of an in-depth tax investigation.

So you should check your tax position.  You made need specialist advice: especially if you are not sure of the basis on which offshore income is taxed in the UK: or if you believe you may have been non-resident or non-domiciled in the relevant years.

If you need to make a disclosure the letter recommends using the WDF. However, other methods might be better: e.g. the Contractual Disclosure Facility.

Ignoring the letter will lead to follow up action by HMRC: eventually leading to investigation – and possible prosecution.

What are the Automatic Exchange of Information agreements?
The UK has three AEOI agreements: which mean they get information from about 100 different countries.

1. Crown Dependencies and Overseas Territories.  The UK has reciprocal agreements with the British Crown Dependencies (i.e. Isle of Man, Guernsey, Jersey and Gibraltar) and the British Overseas Territories (including: the Cayman Islands, Bermuda, Montserrat, the Turks and Caicos Islands, the British Virgin Islands and Anguilla). There is an annual automatic exchange of information relating to accounts with financial institutions in each territory held by residents of the other territories. This came into effect on 30 June 2014.

2. USA. The United States Foreign Account Tax Compliance Act (FATCA) requires financial institutions outside the USA to give information about financial accounts of US citizens to the Internal Revenue Service (IRS).   The UK and USA have agreed to give the UK reciprocal data on the US accounts of UK individuals.  This also started 30 June 2014.

3. 100+ countries worldwide. The Organisation for Economic Co-operation and Development (OECD’s) Common Reporting Standard (CRS) has now been signed by over 100 countries, including all the EU.  Those countries have committed to a common standard for the automatic exchange of financial information.  The numbers involved are increasing all the time. The first information exchange was in 2017.  By the second wave of exchanges (from 30 September 2018) 70 countries were involved.  In 2019 it will involve at least 100 countries.

What does it mean for me?
If you have any offshore income or assets then it is highly likely that HMRC will find out about this. And then they will write to you. Or maybe they have now written and you’ve received one of the letters described above. Either way, you need to review your tax affairs. The one thing you should not do is ignore these letters. That will lead to an in-depth investigation: and possibly prosecution.  You need to act quickly.  You should consider if you need specialist help.

How can Lynam Tax Disclosure Experts help me?
HMRC and the leading professional bodies (e.g. ICAEW, ACCA, CIOT) state that advisers should not undertake work which they are not competent to perform.  The services of suitably qualified and experienced specialists should be obtained.

Our Tax Disclosure Specialists have great experience in dealing with investigations and disclosures in respect of UK residents with offshore bank accounts and other assets. We have the training, knowledge, skills and deep experience to properly manage your offshore disclosure to HMRC.  HMRC use dedicated specialist investigators to deal with offshore issues: you need dedicated, experienced, and committed experts on your side.

To find out how we can help you and for a free, confidential, and no obligation discussion, call:

Paul Lynam: 0845 643 9997

Andrew Nutbrown: 07718 778710

NB: Don’t Wait – The Taxman is getting your details!!