It’s almost a year to the day since HMRC published a set of rules on income generated from overseas assets.
The requirement to correct legislation required UK taxpayers to declare any foreign income or assets to the Revenue before 30 September 2018.
From that point on, HMRC has been exchanging information with more than 100 countries in a bid to crack down on this form of tax avoidance.
If any assets held overseas are proven to be generating income that the Revenue does not know about, there is every chance it will be discovered by this exchange.
Is it illegal to hold overseas investments?
There is nothing wrong in having assets overseas, but you have to declare any overseas income or gains in a tax return.
If you declare income or gains on these assets there is nothing to worry about, providing the assets were funded from known sources of income and capital.
For example, if you receive an inheritance and decide to buy a holiday home in Italy, there is nothing to report other than any potential gain on its sale.
You will, however, have a problem if you rent out the property and do not declare the income on your tax return.
The is the same as any income from UK rentals, except HMRC already knows about this through a link with the Land Registry that goes straight to your tax file.
What information is HMRC exchanging?
The financial accounts of individuals, trusts and businesses are being exchanged with more than 100 other countries.
Disclosures of foreign income or gains, or if HMRC detects foreign income or gains, will be subject to much tougher failure to correct penalties.
Requirement to correct penalties
Substantially tougher penalties have been in place to crack down on this form of tax avoidance.
Before 30 September 2018, it was possible to pay a penalty of around 30% of the tax due.
In September 2019, however, disclosures made through the world disclosure facility are liable to pay the tax in full.
If this worries you in any way, you should contact us urgently with full details of any undeclared income from offshore assets. This forms part of our residency service.
We can then declare this income to HMRC on your behalf, although we will not be able to reduce your liability like we could have done 12 months ago.