By David Pugh
For British expats living overseas, setting aside some time to consider your UK tax affairs isn’t always a top priority. But as you may expect, HM Revenue and Customs (HMRC) do not share the same view.
The UK income tax system works on the basis of self-assessment, so it’s up to the individual to complete a UK tax return to declare all sources of income that fall within the UK tax net to HMRC. Given the complexities of the UK tax legislation, when it comes to any offshore income the position is often far from clear.
Now’s the time to act
Should you believe that you have any unreported offshore income that could be taxable in the UK, the time to act is now, as HMRC are currently focusing their efforts to collect any tax due on undeclared offshore income.
HMRC takes a more favourable view of individuals who come forward voluntarily with any undisclosed income, as opposed to HMRC discovering undeclared offshore income. This discovery is becoming easier for HMRC to achieve under the new Common Reporting Standard (CRS) mechanisms which have been adopted by governments globally.
To help taxpayers come forward to disclose any undeclared overseas income to HRMC, they are currently offering a period of grace for those with relevant offshore tax non-compliance until 30 September 2018. By this time, they need to have approached HMRC with the intention of fully disclosing their non-compliance. As part of this tax amnesty HMRC have confirmed they will not make use of any information they have obtained under the new CRS system until after the 30 September 2018 disclosure deadline.
After this 30 September 2018 deadline has passed, strict new penalties will come into force, with the standard penalty being 200% of the Potential Lost Revenue (PLR), unprecedented in recent history, with the general maximum penalty provisions for the very worst offenders being 100% of the tax that HMRC proved was unpaid. In addition, the scope for mitigation of any penalties issued is limited to only very exceptional circumstances, which highlights HMRC’s determined intention to discovering as much undeclared overseas income as possible.
One further significant change in the pipeline is that HMRC is currently pushing the government to add to arsenal and the power to go back and assess 12 years of any undeclared income in all cases of non-disclosure.
“Name and Shame”
Under the new rules for undeclared offshore income, HMRC now have the right to publish details of those who have avoided taxes of £25,000 or more (a relatively low figure in terms of total UK Tax Revenue).
No longer will this archaic way of disciplining offenders be reserved for just the very serious cases of tax evasion.
All the above does sound alarming but there are simple steps that can be taken to bring your UK affairs up to date.
Today more than ever before, its crucial for individuals to regularly review their tax status and if in any doubt seek advice from qualified and experienced tax advisers.
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