02 December 2020
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HMRC is cracking down on individuals it suspects of not declaring offshore income and gains, according to accountancy firm Mercer & Hole.
Mercer & Hole says it has seen a marked increase in the UK government writing to individuals suggesting that it has information on undisclosed offshore income and gains that they have yet to declare. HMRC is asking that individuals sign a declaration stating that all offshore income and gains have been disclosed.
Henry Lowe, a partner in the Private Client practice at Mercer & Hole said: "Following a substantial increase in information shared from overseas, HMRC has for some time targeted those individuals it believes as having undisclosed offshore income and gains. But this time around it is being more direct suggesting that it has information that could result in criminal offences or prosecution for individuals if they do not act.
There are still a lot of people who have been preparing their tax returns each year on a consistent basis and quite innocently have underdeclared their offshore income and gains as they were not aware of recent changes to the tax rules."
"The letter asks individuals to sign a certificate that states they have disclosed all their declarable offshore income and gains or that they need to bring their tax affairs up to date using the Worldwide Disclosure Facility (WDF). However, it does not necessarily make it clear that such a declaration is voluntary and the WDF may not be the most appropriate approach for a disclosure.
"This is part of HMRC's ‘One to Many' initiative where a standard letter is sent to all persons with a particular source of income or tax status without it necessarily being relevant to the individual recipient.
"It is important to check everything even if you believe your reporting is correct, as individuals that do sign this certificate indicating they have already reported in full and are then later found to have undisclosed offshore income or gains, such as interest from an overseas bank account, face stiff penalties even if simply inadvertently overlooked or forgotten.
"Penalties can extend to a false declaration being considered a criminal offence that can result in prosecution."
Mercer & Hole is cautioning against signing these declarations.
Lowe said: "HMRC do not explain that there is no legal obligation for the declarations to be completed and can be more appropriately addressed by a response from their accountant and not the individual in question. This has some significant advantages, not least of which being that if undeclared income or gains later come to light, the penalties HMRC can levy are significantly reduced."
Lowe added: "In our experience these letters are often being prompted by situations where there is nothing to declare, for example where tax free withdrawals have been made from offshore bonds. We would always urge individuals approached by HMRC to take advice from their accountant before responding or signing anything.
"Conversely, there are still a lot of people who have been preparing their tax returns each year on a consistent basis and quite innocently have underdeclared their offshore income and gains as they were not aware of recent changes to the tax rules. Obtaining a professional review of your circumstances and, if necessary, declaring any unpaid tax to HMRC before they contact you, will considerably alleviate the potential penalties applied."
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