HMRC Foreign Income Disclosure

Case Study: When HMRC asks about your foreign income

The UK has Automatic Exchange of Information agreements with over 100 countries, so HMRC knows if you have declared your foreign income or not.

According to the UK Parliament, there were 6.2 million people (9% of the total population) living in the UK who had another nationality. Within our Central London, Putney and Richmond offices, we also have foreign-born colleagues who had previously worked in another country. With international migration now a common trend, it is not uncommon to see some people struggling with foreign tax issues, particularly when they thought they had reported in another country but received a letter from HMRC pertaining to the overseas income.

HMRC Foreign Income DisclosureOne of our clients, Victor from Richmond-Upon-Thames, had previously lived and worked in Singapore for a decade, during which time he acquired some shares and a few assets. When Victor came to work in London, he didn’t pay much attention to his tax affairs as he is on PAYE. It also didn’t cross his mind that he had to report the small (and irregular) income he still receives and remains in his bank account there.

But one day Victor received a letter from HMRC about his foreign earnings which he had not reported in the UK. Panicked, Victor came to our Richmond-Upon-Thames office and asked for our help. Our personal tax accountants  analysed Victor’s position and advised on the correct remedy to rectify his tax filing requirements. Seeing how swiftly we acted and provided him with a satisfactory result, Victor has now engaged us to report his future foreign income through Self Assessment tax return service.

Worldwide Disclosure Facility (WDF)

If you have foreign interests, chances are you need to make a disclosure through the WDF, and preferably you do it before HMRC sends you a letter. If you aren’t sure if a disclosure is required, talk to our qualified personal tax accountants. We can review your specific circumstance and make the best recommendations.

The WDF users

HMRC wants anyone needing to disclose a UK tax liability that relates wholly or partly to an offshore issue to use the WDF. An offshore issue includes unpaid or omitted tax relating to:

  • Income arising from a source in a territory outside the UK
  • Assets situated or held in a territory outside the UK
  • Activities carried on wholly or mainly in a territory outside the UK
  • Anything having effect as if it were income, assets or activities of a kind described above

The WDF should also be used when you have funds connected to unpaid or omitted UK tax that you have transferred to a territory outside the UK or are owned in a territory outside the UK.

Examples of tax liabilities that you need to declare

  • Income from letting residential property or land
  • Capital Gains from assets that increased in value between the time you bought them and the time you sold or transferred them
  • Income from running a business
  • Income from freelance or commission-based work
  • Income from accepting credit card or debit card payments
  • Investment income
  • Any other incomes that you should have paid tax on

Call Tax Agility on 020 8108 0090 about disclosing your foreign income on the Worldwide Disclosure Facility today.

The WDF process

To use the WDF process, you must first register and HMRC will issue you a unique disclosure reference number.

After the registration process, you have 90 days to:

  • Gather the information you need to fill in your disclosure
  • Calculate the final liabilities including tax, duty, interest and penalties
  • Compete the online form

As the WDF process may not be straightforward, we do encourage those who have foreign assets to come to us for professional advice first or allow us to file on behalf of you.

Don’t underestimate the implications

HMRC wants to send a strong deterrent message to those who don’t disclose their foreign assets. Accordingly, if you fail to make an accurate disclosure or refuse to provide supporting documents allowing HMRC to check the accuracy, you may receive a higher penalty and have your details published on the gov.uk website. Also, HMRC may choose to launch a civil or criminal investigation against you. To save yourself from the headache and unwanted attention, it is best to speak to our qualified personal tax accounts first.

Personal tax accountants at Tax Agility

Tax issues are never straightforward and things can get complicated quickly if you have foreign assets which you may not know that you need to declare and pay tax on.

Fortunately, our personal tax accountants are here to assist. We will first seek to understand your tax affairs and identify what needs to be disclosed through the Worldwide Disclosure Facility (or not).

Should a disclosure is needed, we can help to register you, prepare and submit your disclosure, work out how much tax, interest and penalties you may need to pay, and negotiate a payment arrangement if it is needed. Working with you every step of the way, we can help to make sure that you aren’t paying more than you should, and the disclosure matter will be completed quickly, efficiently and professionally.

Call us today on 020 8108 0090 and speak to a knowledgeable tax specialist in either our London Richmond-Upon-Thames office or our London Putney Office.


How does HMRC expose tax evasion and avoidance?

Over the last few years, the UK government has been making plans to clamp down on tax avoidance and tax evasion, with the latest package of measures announced in Budget 2018.

Also, the new strict liability offences for offshore tax evasion came into effect in 2018. This means failing to declare offshore income of more than £25,000 is now a criminal offence – the term ‘strict liability’ means HMRC doesn’t need to prove ‘mens rea’, that a taxpayer has criminal intent before they can be convicted of a criminal offence such as tax evasion.

In this post, we look at what HMRC can do to catch those who aren’t paying their fair share of tax and discuss a few methods which HMRC uses to find tax dodgers.

Connect

Introduced in 2010, Connect is the name of HMRC’s powerful computer system, designed to detect those who skip out on tax. It takes in vast amounts of financial data from websites, banks and other online sources, and then compares them against tax returns to look for undeclared income. For example, if you recently purchased an expensive car but have a low declared income, then Connect would see that purchase as unlikely and raise a flag.

As of 2017, HMRC can also force online platforms such as Airbnb and Amazon to relinquish customer data if it may help in catching tax evaders, and they are now cooperating with offshore tax havens to gather even more information. This makes it almost impossible to hide information from the system.

The “Offshore, Corporate & Wealthy” unit

The ‘Offshore, Corporate and Wealthy’ unit is a team of people tasked with tracking down those who use offshore accounts to avoid tax. They form part of HMRC’s Fraud Investigation Service, and look for either individuals or companies that hide significant wealth offshore.

The 2018 budget also stated that the government will publish an updated offshore tax compliance strategy, building on the progress already made in tackling offshore tax evasion.

Fraud hotline

People can give HMRC a call to report tax fraud and tax evasion. The numbers are 0800 788 887 (UK) and 0203 080 0871 (outside the UK). You can also report it online, or write to HMRC at Cardiff CF14 5ZN. Some informants are rewarded, and according to a post published by Financial Times, in the 2017-2018 tax year, there were 40,000 tip-offs and HMRC rewarded these informants with £343,500.

Data leakage

From Panama Papers to Paradise Papers, these documents revealed how rich people and close associates of many current and former heads of state and government launder money and avoid tax. Even the Queen was dragged into the scandal when the Paradise Papers revealed that millions of pounds from her private estate Duchy of Lancaster were invested in a Cayman Islands fund, sheltered from UK tax. According to ICAEW (Institute of Chartered Accountants in England and Wales), as a result of these leaks, HMRC has investigated many individuals in relation to tax evasion.

Contact Tax Agility

As HMRC aims to minimise the ‘tax gap’, ie the difference between the amount of tax it should receive vs what it actually received, it will continue to strengthen its policies and enhance the methods it uses to stop tax evasion.

In the event that you have forgotten to notify HMRC about your offshore income, get in touch with one of our experienced tax accountants right away, so we can work with you to notify HMRC and ensure that the return is correct.

To find out more about how we can help save you money, get in touch on 020 8108 0090 or fill out our Online Form.

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This article was first published on 19/12/2012 and updated on 23/01/2019.

This post is intended to provide information of general interest about current business/ accounting issues. It should not replace professional advice tailored to your specific circumstances.


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HMRC provided ample literature regarding their Health and Wellbeing Tax Plan ahead of its launch and during the period in which health and wellbeing professionals could benefit from it. It was made clear that should you have undisclosed income or gains, and you choose not to take part in the voluntary disclosure opportunity, if HMRC later find out about your undisclosed income or gains any penalty you receive would be significantly higher.
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Settlement Opportunity for Contractor Loans

Tax Time_TaxAgility Accountants LondonHMRC is currently offering a settlement opportunity, available until 9 January 2015, for the users of contractor loan tax schemes for tax years up to 5 April 2011.

Commonly known as a tax-avoidance arrangement, a contractor loan scheme is a tax scheme whereby, according to HMRC, “…non-UK employers have paid you untaxed income or given you a loan instead of part of your salary.” Users who agreed to be paid in this way argue that being paid via a loan means they’re not subject to income tax, however, HMRC views these loan schemes as a “particularly aggressive” method of tax avoidance.

Speaking on the issue of tax avoidance, and the settlement opportunity currently being offered, Jennie Granger, Director General for Enforcement and Compliance at HMRC said, “Many people regret ever getting involved with complex aggressive tax avoidance schemes and HMRC is providing an opportunity for contractors to come forward and straighten out their tax affairs.”

Your Eligibility

Designed to allow you to “bring your tax affairs up to date on the best possible terms,” anybody who has used a contractor loan scheme can take up this settlement opportunity from HMRC unless you’re currently:

  • Subject to HM Revenue & Customs' (HMRC's) criminal investigation policy,
  • Subject to civil investigation of fraud procedures,
  • A UK employer who has used an Employee Benefit Trust and should being using the employee benefit trusts settlement opportunity.

More details can be found on the settlement opportunities page on HMRC’s website surrounding individuals who can and can’t take advantage of this settlement opportunity. Needless to say, if you’re unsure whether you’re eligible to use this opportunity, speak with your accountant before contacting HMRC directly.

Know What You Owe

Whether you (or your accountant) contact HMRC to take part in this settlement opportunity, or you get a letter from HMRC to let you know they believe you owe them unpaid income tax due to your use of a contractor loan tax scheme, HMRC may estimate the income tax you owe based on typical rates.

For this reason you should make a point to check your personal bank statements and records to let HMRC know of the exact amounts you received via your contractor loan tax scheme. To know how much you owe prior to agreeing to settle, complete form DO3 to request a calculation.

Agreeing to Settle

If you agree to settle, the terms of any signed agreement will become legally binding between both you and HMRC, and will not be affected by any further legal proceedings going forward.

Your settlement will include late payment interest for income tax payments HMRC believe you should have paid, but by coming forward as part of this opportunity you will not be liable to any penalties (however, if any of your loans came from a trust you may have to pay Inheritance Tax on the amount due).

Interest will add up from your original income tax due dates until the moment you pay.

Refusing to Settle

If you choose not to take advantage of this settlement opportunity HMRC will continue in their efforts to ensure that anybody who has previously used a contractor loan tax scheme to avoid paying income tax eventually pays back what they owe, with interest and National Insurance Contributions (NICs), alongside significant monetary penalties.

Interested in a Settlement Opportunity for Contractor Loans?

To speak with a professional to discuss the settlement opportunity for contractor loans, or anything else, contact us today on 020 7129 1199 or get in touch with us via our contact page to arrange a complimentary, no obligation meeting.

 

This blog is a general summary. It should not replace professional advice tailored to your specific circumstance.


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Under the new rules associated with APNs it’s mandatory for contractors who receive one of these letters to pay any tax bills upfront before appealing their case; including the full payment of all and any bills you dispute. If you don’t pay your tax bill in full you will automatically incur fees and penalties, even if you intend to appeal the decision.

Though these new rules were due to come into effect in July, HMRC have since revealed that APNs will start being sent out from August. It’s worth noting that if you are due to receive an APN you will first be sent a notice letting you know that HMRC have placed your tax payments under consideration. You should use this time to gather your payment options, as once you receive your APN you’ll have exactly ninety days to pay your bill in full.
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This hasn’t come as a shock to observers, with Chancellor of the Exchequer George Osborne touching upon these plans moving forwards as part of his Autumn Statement in December of last year (2013).
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Disguised Employment Relationships via LLPs

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