1. What offshore income is
Income is considered ‘offshore income’ if it comes from a territory outside the United Kingdom. It includes:
- interest from overseas bank or building society accounts
- dividends and interest from overseas companies
- rent from overseas properties
- wages, benefits or royalties earned outside the UK
2. UK taxpayers need to declare offshore income
If you’re a UK resident, you’re breaking the law if you fail to tell HMRC about your taxable offshore income. HMRC is getting tougher on those who try to evade tax by hiding their assets or income offshore. They are increasing the size and range of penalties charged, and increasing the number of prosecutions of serious evaders.
3. Make sure you get the best advice
HMRC suggests that if you’re having trouble working out whether you have paid the right amount of tax or have offshore income you need to declare that you can contact them direct. We’d suggest that you contact a specialist tax adviser such as the Bedrock team. Dealing with offshore income and assets from a tax perspective is not straight forward and needs to be considered in the context of all your income and assets.
4. Previous advice may be outdated
Because laws and specific circumstances can change, advice that you took in the past may no longer be valid. Unfortunately some taxpayers who’ve sought guidance in good faith, get caught out because the advice has become out of date. It’s important to check your tax affairs regularly, hence the need for expert tax advice.
5. Where you normally pay tax
If you’re not resident in the UK for tax purposes you won’t usually be liable to pay tax in the UK on your offshore incomes and gains but it’s important to check your residency status and what’s taxable from offshore income.
6. There are ways to tell HMRC about any untaxed worldwide income
If you’re concerned that you’re not paying the right amount of tax you can use HMRC’s disclosure facilities but again take specialist tax advice. It is likely that you will still need to pay the tax that is legally due in full, alongside penalties and interest but this is not always a straight forward calculation and we maybe able to spot circumstance that need to be considered that will impact on that final figure.
7. New tougher penalties for offshore evasion and non-compliance
HMRC has introduced new legislation called the Requirement to Correct which will dramatically increase the penalties for people who have not declared tax or declared the wrong amount of tax on their offshore income and gains.
If you have declared your taxable income and gains then you have nothing to worry about. But if you haven’t, and HMRC finds out, you will face an investigation and will have to pay the undeclared tax, a penalty of up to double the tax you owe, and could even go to prison.
You can avoid being charged the higher penalties by making a full disclosure of all undeclared tax liabilities under the Worldwide Disclosure Facility.
If you’re concerned, now is the time to deal with the situation. You have until 30 September 2018 to correct this before the tougher new penalties are introduced.
8. A new international agreement is making it harder to evade tax on offshore income
HMRC has started receiving more information about international investments and financial structures held offshore by UK tax residents. More than 100 countries and jurisdictions have already committed to exchange this data.
9. HMRC is cracking down on those who help others to evade tax offshore
New laws will punish the enablers of evasion, not just the evaders themselves. Enablers can face civil penalties, criminal prosecution and public naming.
10. There’s nothing wrong with having investments overseas
As long as you declare all taxable income and gains on your UK tax return you have nothing to worry about. If you’re confident that your tax affairs are up to date, you don’t need to do anything further. If you’re unsure, talk to the Bedrock team as we may be able to help.
You can find more about making a disclosure to HMRC and how we can help on our website.
