HMRC has more access to the details of UK residents’ overseas assets than ever before, and UK residents need to be aware that coming forward is a better position to be in than being chased by HMRC.
Interestingly, the common ‘nudge letters’ we’ve seen over the past few years, have this year been accompanied by new digital warnings in HMRC’s Self Assessment Tax portal for the 2020-21 tax year.
Do I Need To Declare All Overseas Income?
Unfortunately all income, no matter where it’s from, must be declared. The majority of overseas income will be subject to UK tax – even if it’s already been taxed in another country. In addition, any overseas income may push you into a higher tax band and so could have a large impact on your tax liabilities.
What Is A ‘Nudge Letter’?
A ‘Nudge Letter’ is a friendly, but often not too friendly, prompt from HMRC that you may have forgotten about something… something they’re probably already aware of and waiting for you to declare.
In this case, the Nudge Letters we’re referring to are relating to overseas income which you may either have forgotten to declare on your Self Assessment Tax Return, or that you may have omitted for whatever reason. HMRC will not give specifics, even if you call them, the idea being that you will be scared into declaring everything – not just what they already know about – because you have no idea how much they are already aware of!
This is what an overseas income Nudge Letter looks like:
If you’ve received a ‘Nudge Letter’ do not ignore it. HMRC have access to a growing amount of data as the world becomes more and more connected. If you’ve received a letter it’s because they already know there could be overseas income or gains which have not been declared, not only for the current year but earlier years too.
And while sometimes they are wrong, or there has been a misunderstanding, you must still respond.
You will have 30 days to complete a Certificate of Tax Position statement to confirm either:
- Your tax affairs are not up to date and that matters are to be regularised by the making of a separate disclosure via the Worldwide Disclosure Facility (“WDF”); or
- Your tax affairs are up to date, no additional tax is payable and all offshore income, assets and gains have been declared in the UK, as required.
You are strongly advised to contact your accountant as soon as possible to help you produce a Certificate of Tax Position and to discuss any overseas income or gains. False statements on this certificate can result in criminal prosecution, so they must be handled with care. The tax team at Warr & Co can provide help in completing the Certificate of Tax Position and the WDF. Please use the contact form and a member of the team will be in touch.
Overseas Income Online Warnings
We have become aware that HMRC have updated the Self Assessment Tax Return portal for the 2020-21 tax year. From 6th April 2021 you may file your 2020-21 Self Assessment Tax Return online, and when you do you may now see this if you have any overseas income or gains they’re expecting you to declare:
As with Nudge Letters, please do not ignore this warning. This is not a standard notice to all taxpayers, this will be specific to your account. As with the Nudge Letters, this means they have some information to indicate there is overseas income or gains.
If you see one of these warnings when filing your Tax Return it would be wise to contact your accountant to discuss the income or gains in question so that we can assist you rather than continue with your online submission.
This is an interesting development, and demonstrates how HMRC are putting more and more data together to tackle tax evasion.
Please Note: If your accountant is filing your Self Assessment Tax Return on your behalf they use third party software which will not show this warning – please always be 100% transparent about any income with your accountant – whether you think it is relevant or not.
If you suspect you may have undeclared overseas income, the team at Warr & Co can assist you and ensure you are tax-compliant in the UK. Please contact our team now to book in a no-obligation free consultation.
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