Taxpayers with overseas links have been sent a final written warning from HM Revenue & Customs (HMRC) intended to flush out those who may be hiding undeclared income.
Warning letters sent to individuals in mid-August are the latest in a series of correspondence from the tax authorities urging people to declare any “overseas income or gains, including investments and accounts” by the end of September to avoid paying higher tax penalties.
From September 30th, new legislation called the Requirement to Correct (RTC) will force UK taxpayers to tell HMRC about any offshore tax liabilities relating to UK income tax, capital gains tax, or inheritance tax.
Any individuals who have paid the incorrect amount of tax on overseas income in previous years must have corrected their tax returns by the deadline, or the resulting fine will double to 200% of tax owed.
However, UK taxpayers may still not realise they have a requirement to declare overseas financial interests — which include renting out a foreign property, transferring income and assets from one country to another, and letting out a UK property while living abroad.
The RTC rules stretch far beyond those who may have committed tax evasion; it potentially includes those who have had previous professional advice and those who may have fallen foul of technicalities.
As the rules are focused on income tax, capital gains tax and inheritance tax, there is a huge onus on individuals to review their personal tax affairs and it also places added pressure on trustees and executors of death estates.
With updated guidance published in July and further updates on August 21st, there is little time for taxpayers to make decisions based on the latest RTC guidance.
HMRC guidance calls on those with uncertain tax issues to make a voluntary disclosure and start this process before September 30th.
The date of the introduction of RTC has been timed to coincide with the date by which more than 100 countries, including the UK, will be able to exchange data on financial accounts under the Common Reporting Standard (CRS), allowing HMRC to crackdown on offshore non-compliance.
Failure to declare and correct tax irregularities by September 30th will result in attracting new and harsher penalties, including a minimum financial penalty of 100-200% of the tax liability, the possibility of being named and shamed and an asset based penalty of up to 10% of the asset’s value where the tax at stake is over £25,000 in any tax year.
HMRC has been keen to state there is no demand for information: the letters gave taxpayers a chance to review information already provided as well to ensure full responses had been received.
It also said that any information supplied to HMRC as part of the current inquiry did not need to be supplied again.
“Our compliance experience is that, on occasion, only partial information has been supplied or not all questions have been answered, which may lead to customers being affected by these penalties.
“We are urging UK taxpayers with assets or investments abroad to check whether they have tax to pay regardless of receiving contact from HMRC,” a statement read.
Does the new Requirement to Correct rules impact you? Speak to our team today to discuss getting your tax information updated before September 30th and ultimately avoiding potentially heavy fines.