Are the days of hiding assets overseas still a working strategy to avoid UK tax?
HMRC have recently warned taxpayers that they could face penalties if they fail to declare their income on foreign assets before the Requirement to Correct legislation comes into force.
What is the “Requirement to Correct” legislation. Taken literally, it could determine that teachers now have a legal obligation to correct pupils’ homework, or that galleries will be required to ensure that all pictures are hung parallel to the ground? What it actually means is that from 1 October 2018, UK taxpayers will be under a legal obligation to notify HMRC about any offshore tax liabilities relating to UK Income Tax, Capital Gains Tax, or Inheritance Tax.
And beware, from 1 October 2018, the UK will be exchanging information on this topic with more than 100 countries. HMRC says:
From 1 October more than 100 countries, including the UK, will be able to exchange data on financial accounts under the Common Reporting Standard (CRS). CRS data will significantly enhance HMRC’s ability to detect offshore non-compliance and it is in taxpayers’ interests to correct any non-compliance before that data is received.
The most common reasons for declaring offshore tax are in relation to foreign property, investment income and moving money into the UK from abroad. Over 17,000 people have already contacted HMRC to notify the department about tax due from sources of foreign income, such as their holiday homes and overseas properties.
Teachers and gallery owners can breathe a sigh of relief. UK owners of offshore assets that produce income or taxable gains, and that they have not previously declared to HMRC, would be advised to seek professional advice.