Background

Over the last couple of months, we have seen a significant number of HMRC nudge letters. This is a further tranche after the first set of letters was issued over 2 years ago.

These nudge letters have been prompted as part of HMRC’s newly acquired information sharing powers with other countries. Specifically, HMRC have obtained a significant amount of information relating to individual and company foreign bank accounts. For people identified by HMRC as having offshore bank accounts but who haven’t declared foreign income, HMRC have opted to issue letters in a “scattergun” approach without first undertaking any due diligence. The intention is to prompt people with undeclared foreign income to resolve their affairs.

The reason for HMRC using this method is that HMRC do not have the manpower available to them to allow them to investigate every person for whom they hold information.

What the forms say?

The forms give the taxpayer 4 options:

• Make a disclosure
• The overseas income/gains is already declared
• The overseas income/gains have not been declared but are covered by personal allowances/reliefs
• The overseas income/gains have not been declared as they are not liable to UK tax.

Our stance is that the forms should not be completed unless a disclosure needs to be made. This is because HMRC could use a completed form against your client should an investigation be opened into their affairs.

The more nefarious area of this project relates to the HMRC’s offshore penalty regime, namely failure to correct an offshore tax matter by September 2018.

Requirement/failure to correct.

Under the current rules, HMRC have instated an organization-wide policy, backed by legislation, that any penalties for periods before 5 April 2017 relating to an offshore matter should be 200% of the tax due. This is reduced to a minimum of a 100% penalty if disclosure is unprompted and 150% if prompted provided full co-operation throughout the investigation.

It is our view that this penalty treatment is extremely excessive and, as with all of our clients, we seek the minimum penalties available wherever possible, including challenging HMRC where necessary (which happens on a routine basis).

How we can help

Proactive action is required to ensure that HMRC do not open significant, intrusive investigations into your client’s affairs or cause your client to pay significantly more than they should.

Should your client have:

• undisclosed offshore income, or
• have received one of the attached letters

We can provide the necessary independent guidance and assistance to ensure the process is managed and resolved. To date we have dealt with a significant number of these letters and are fully versed on the best strategies for your client to ensure the most beneficial outcome.

If you would like a free no obligation discussion in relation to any aspect of the above, please contact us by email to info@independent-tax.co.uk by calling us on 01757 630010.