Got a property or bank account abroad? You’ve got until the end of September to tell HMRC

Gary Heynes, head of private client at RSM, on how holiday home owners could be caught out by tough new disclosure rules for tax returns, and why you need to act now.

As the summer comes to an end, UK taxpayers could be sleepwalking into significant penalties or even criminal charges from the taxman.

That could include you, especially if you own a property abroad that you make money from, or simply have a foreign bank account.

HMRC has been busy collecting a vast amount of offshore financial information and matching this data with UK taxpayers' names.

These are known, in tax circles, as the Requirement to Correct (RtC) measures.

Now, this may not be any cause for alarm. You may be accustomed to regularly filling in a tax return each year, reporting your offshore earnings and UK investment profits.

But, is your tax return really correct?

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Foreign bank accounts and holiday homes

There are plenty of ways to slip up when it comes to tax returns.

Maybe you have a local bank account in the sunny climes for use when overseas because it makes it easier to make local payments for their property? Maybe it pays interest? If not now, then perhaps in earlier years when interest rates were higher?

You may also have rented out the property from time to time. Has all that overseas income been declared in the UK?

Most UK taxpayers are taxable on their worldwide income and gains, so all interest payments and property income they earn from overseas should be reported and taxed in the UK.

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Disclose your assets now

Don’t assume that HMRC can’t double-check what you tell them: they have received data from countries around the world in recent years due to the Common Reporting Standard.

Flush with its newfound data, the taxman has given taxpayers a window until 30 September 2018 in order to disclose undeclared foreign profits which should have been taxed in the UK. This could be for the last 20 years.

The scope of the Requirement to Correct is very wide.

Any UK resident individual with overseas sources of income or gains such as financial investments, bank accounts, rental properties or any type of trade or employment should seek advice to ensure that these have been correctly declared and taxed in the UK (even if tax has been paid locally).

Care also needs to be taken in respect of managed UK investment portfolios which can often invest in overseas securities.

Similarly, any UK resident individual with any interest in an overseas structure or corporate entity must ensure that the structure’s tax position has been fully reviewed from a UK tax position recently. The tax treatment of such structures has changed significantly over the years and it may be that advice that was taken just a few years ago is now out of date.

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How to inform HMRC

If you’ve got extra information to disclose, you have until 30 September 2018 to make an online notification to HMRC of your intention to make a disclosure under the Worldwide Disclosure Facility (WDF).

Following this notification, you will have 90 days to quantify the tax liability and complete their disclosure through the WDF.

For overseas holiday home owners going forward it may be easier to have an overseas bank account that does not pay interest, or use a foreign currency account with a UK bank. It is also important that all foreign bank statements are retained as the chances of HMRC querying the foreign tax position will be much higher following the flow of CRS information.

In some cases, because of the information it holds, HMRC has already written to taxpayers, asking them to confirm all overseas profits have been declared and including a declaration to be signed confirming the position.

If such amounts, no matter how small, remain undeclared after 30 September and HMRC then enquires into the taxpayer's affairs, a new severe penalty regime will apply – which could also include criminal charges.

If you are feeling a little less comfortable now, then action may well be needed. Whether it is something undeclared from the past 20 years or whether it's a letter from HMRC, seek professional advice.

As usual, it’s best to get to HMRC before they get to you.

Gary Heynes is a partner at tax experts RSM. The views expressed in this article do not necessarily represent those of loveMONEY.