Exchange of information and voluntary disclosure

We are now at the start of an era where unprecedented levels of information will be supplied to HMRC in respect of UK residents who have overseas interests.  This will have a major impact on UK tax resident non domiciled individuals.

From 2016 58 counties have signed up to automatically exchange information about assets and income to other relevant authorities such as HMRC and from 2017 a further 35 countries will join the club.

This will impact on: -

  • UK residents with undisclosed assets overseas
  • UK residents with complex structures in place involving overseas assets as these will be reported to HMRC possibly for the first time.

The following will be exchanged automatically: -

  • Name, address date of birth and other identifying information
  • Account numbers and details of the relevant institution
  • Annually, form 31 December 2014 in some cases, the account balance or value of asset, the total gross amount of funds paid into the account and the value of any assets on their sale or redemption.

There are special rules for UK resident non domiciled individuals, which the offshore institution may follow if it so choses, if they chose to go down this route both the institution and the individual need to elect for it to apply.  The first report will made to HMRC by 30 September 2016 covering the period 30 June 2014 to 5 April 2015.

Under this arrangement only the following is disclosed: -

  • Name, address date of birth and other identifying information
  • Flow of funds from the account to the UK, including account numbers

When they receive the information HMRC are likely to put the onus on the tax payer by asking them to conform that they have declared all the relevant information on their tax returns and that their UK affairs are in order both currently and historically.  They will then decide what action to take based on the amount of risk they assess to the reply.  In some cases an investigation with be started immediately.  If this is the case you need to be prepared to respond.

Some common area’s they have looked at to date include: -

  • Can the source of the capital held overseas be evidenced?
  • Has bank account segregation to preserve clean capital always been carried out correctly or have the clean capital accounts been contaminated?
  • Remittances to the UK directly or to third parties
  • Beneficial use of assets in the UK owned by overseas companies
  • Use of overseas credit cards in the UK
  • UK source income added to overseas portfolios
  • Inheritance tax entry, exit and ten year charges

As a result now would be a good time to review your affairs in detail to make sure you are ready for these disclosures.  Currently there are arrangements in place where a voluntary disclosure can be made to HMRC and favourable terms will be applied to the settlement, if you do not act and HMRC obtain this information you would face more severe penalties and maybe even prosecution.

The following action should be considered: 

  • Discuss the position with your offshore institution to ensure you fully understand the disclosures they will make
  • As a result review your affairs in detail to ensure you are fully compliant and ready to fend off a change from HMRC
  • Disclose any amounts you need to declare before they come knocking on your door

As regards how to declare such information to HMRC there are various agreements currently in place the main one being the Liechtenstein agreement which expires in 2016, under this agreement you can make disclosures with certain assurances and benefits.  The main benefit is you will not be prosecuted but in addition the number of years they can go back and look at is limited as is the penalty they can charge and the use of a composite rate of tax is applied to the disclosure.

If you feel you may have an issue relating to this matter or you would just like us to go over your affairs in detail to obtain peace of mind, please do not hesitate to contact us and we can then prepare a personal detailed action plan.

Services we offer

We are pleased to able to offer the following taxation based services: -

All taxation services are arranged on a fixed fee basis with the fee to be charged agreed in advance of any work being undertaken.

  • A General tax consultation and/or specific tax advice;
  • Tax planning for your general situation or for a specific transaction;
  • Registration for National Insurance and Unique Tax Reference numbers;
  • Preparation and submission of annual self-assessment returns;
  • Preparation and submission of return for overseas landlords;
  • Formation of UK and offshore companies in respect to an acquisition of the commercial property and administrative and accounting services for corporate entities.

For all questions regarding your business in the UK and tax planning, please contact our Business Consultancy team at Law Firm Limited on +44 (0)20 7907 1460 or via email

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