Offshore financial advisers' end-of-August warning over tax penalties

Offshore financial advisers' end-of-August warning over tax penalties

Financial advisers with clients that have overseas investments could be hit with a £3,000 fine if they don’t act now to advise clients in writing of new rules relating to such investments, HM Revenue & Customs has warned.

The government’s tax division warned advisers last September that they must send their clients a strongly-worded letter from HMRC warning them to bring their affairs up to date. Advisers have until the end of the month to do or face the penalty.

The letter is quite clear about what faces individuals and companies shirking their tax liabilities under UK law, saying “the tax world is becoming more transparent” and warns investors to “come to us before we come to you”.

The department says, “The criteria for this are, if you’ve provided them with financial advice or services, provided them with an overseas account, referred them for an overseas account or referred them for advice or services overseas.

“You only need to send the notification letter to clients who are a UK tax resident in either the 2015-2016 tax year or  2016-2017 tax year.

The covering letter must include a company’s usual branding, and the client’s name and address on set text.

Time is running out…

HMRC added: “From 2016, HMRC is getting new financial information about our customers from more than 100 jurisdictions – including details about overseas accounts, structures, trusts, and investments.

“HMRC is already using information, supplied by overseas banks, insurers, and wealth and assets managers, to identify the minority who are not paying what they owe.

“Financial institutions in more than 100 jurisdictions around the world are being legally required to find out the tax residence of their account holders and report details of their accounts, structures, trusts, and investments to be exchanged with the appropriate tax authorities.

Overseas accounts

“As a UK tax resident, any overseas accounts you have will be sent to HM Revenue & Customs. This gives HMRC unprecedented levels of information to check that, as in most cases, the right tax has been paid.

“If you have already declared all of your past and present income or gains to HMRC, including from overseas, you do not need to worry. But if you are in any doubt, HMRC recommends that you read the factsheet attached to help you decide now what to do next.

“You need to regularly check that you have declared all of your UK tax liabilities and, if needed, bring your tax affairs up-to-date. This is your responsibility.”

It finished its statement somewhat ominously in saying: “If you choose to delay in coming forward, it’s very likely to cost you more and there is also more chance that HMRC will come for you.”

For more information on the new requirement to notify clients by letter of their tax obligations, on HMRC’s website, click here.