HMRC have sent thousands of letters “reminding” taxpayers that all taxable foreign income and gains for years prior to 2017/18 must now be declared to HMRC under the Requirement To Correct rules, before harsh new penalties come into effect on 1 October 2018.
The Requirement To Correct (“R2C”) legislation creates a legal obligation for anyone with undeclared UK tax liabilities connected in any way to a foreign income, assets, entities, or transactions, to disclose this to HMRC by 30 September 2018. R2C covers income tax, capital gains tax and inheritance tax. UK residents and taxpayers have to correct anything for earlier years which HMRC could assess as at 6 April 2017 (i.e. the previous 20 years).
From 1 October 2018, the new Failure To Correct penalties of 100% – 300% (plus other sanctions) will apply in respect of any additional tax due from an individual who has failed to disclose by 30 September 2018.
With the increased amount of data collected by HMRC under the automatic exchange of information agreements, in particular via the Common Reporting Standard (CRS), the chance of errors or omissions being detected is much greater. By September 2018 over 100 jurisdictions will be sharing information under the CRS. HMRC are warning that there are no longer any “safe havens”.
The Warning Letters
All taxpayers dealt with by HMRC’s Wealthy Units (WMBC), and some taxpayers dealt with in the normal HMRC network, are being sent so-called “nudge” letters about this. There appear to be three types of letter:
Specific detailed letters where there is an ongoing enquiry. These are usually 6 – 8 pages (including schedules). They are generally the same for each taxpayer, with a few bespoke requests for some particular items of information. And there are some additional questions for anyone claiming foreign domiciled status.
A one-page generic letter suggesting that people “check that their tax affairs are up-to-date and complete”. This letter seems to be sent out to people who have returned details of offshore income and gains in the past: but not in their most recent tax returns.
A more worrying version of this generic letter often refers to information being received under the Common Reporting Standard, or from other sources. These letters require the taxpayer to complete an attached “Certificate of Tax Position”. The Certificate requires people to confirm that their tax affairs are correct and complete, or to state that they intend to make a disclosure (under the Worldwide Disclosure Facility). The certificate contains a warning about potential prosecution for false statements. There is no legal requirement for anybody to complete and return the certificate. However, failing to do so will inevitably lead to an investigation by HMRC. Such an investigation could be conducted under the terms of the Contractual Disclosure Facility, or even as a criminal investigation.
What does this mean for me?
If you have received one of these letters from HMRC then it would be highly prudent for you to review your tax affairs: particularly in relation to offshore income, gains and assets. You may need to take professional advice regarding this. If you do have any irregularities in your tax affairs it is important that you take steps to regularise these as soon as possible: before HMRC take proactive action at you.
How can Lynam Tax Disclosure Experts help me?
Our Offshore Tax Disclosure Specialists are highly experienced in managing disclosures for UK residents with foreign bank accounts and other offshore assets. We have the training, up-to-date knowledge, specialist skills, and the depth of recent and relevant experience to properly handle your disclosure to HM Revenue and Customs. We can reduce the stress and get the best possible result for you: even if you are already under investigation. HMRC’s offshore investigators are dedicated specialists: you need experienced and committed experts on your side.
For a free, discreet, and no obligation discussion, call Paul today on: 0845 643 9997