Have you checked your overseas assets, income or gains for tax purposes?

We’ve seen an increasing number of clients receiving letters from HMRC stating that they have information which shows that you may have received overseas income or gains which are taxable in the UK. They have received this information through the UK’s tax information exchange agreements with other countries.

What should you do?

If you receive this letter, don’t panic. It’s a nudge letter from HMRC to encourage taxpayers to check their tax affairs, especially overseas income and gains. Please seek professional advice to help you check your overseas sources of income.

If you haven’t received such a letter, but you think you may have taxable income overseas that hasn’t been declared in the UK, there’s no harm in contacting a Larking Gowen specialist to check this for you, for peace of mind.

Common errors

There are some common errors/misconceptions on individuals’ tax returns which include:

• Your offshore income and gains are already taxed overseas, so you believe your tax obligations are met and that no tax is due in the UK
• The income or gains are tax exempt overseas, so it’s assumed they are also tax exempt in the UK
• The overseas income or gains are never received in/transferred to your UK bank account, so you assume they’re not subject to UK tax
• No foreign tax arises on your offshore rental, investment etc income, so it’s assumed the tax liability in the UK must be £nil
• Taking tax advice initially, but not seeking further advice when your personal circumstances change
• You make a loss or a small gain on your offshore property disposal, but don’t take into consideration that exchange rates at purchase and sale in GBP may result in a gain in the UK

Causes of errors in relation to trusts and estates’ UK tax liabilities include:

• The 10-year inheritance tax (IHT) or the overseas asset on IHT return is omitted
• The investment manager has chosen some investments that are UK situs
• The rules for constructive remittances are overlooked
• Not seeking further advice when personal circumstances change, such as residence or domicile

How to correct errors

After a thorough check of your overseas income and gains, you may find some errors have been made. When an error is identified, you can use HMRC’s Worldwide Disclosure Facility to bring your tax affairs up to date.

Penalties and late payment interest will be charged in addition to any tax, however, these can be reduced if you make a disclosure voluntarily.

Need help?

For further information, please get in touch with your usual Larking Gowen contact. You can find contact details on the Our People section of the Larking Gowen website. Alternatively, call 0330 024 0888 or email enquiry@larking-gowen.co.uk.

Yinchao Zou