Press Room

4 Aug 2020

Offshore income and the long arm of HMRC…


If you are a UK tax resident filing on the arising basis by virtue of being UK domiciled or otherwise, you are required by law to declare your worldwide income and gains to HMRC.

HMRC have become stricter on the laws regarding offshore income over recent years, and it is important to understand what information is provided to HMRC by third-parties and your disclosure requirements.

Can HMRC obtain information about my offshore structure?

Yes – Originally agreed in 2014, the OECD developed the Common Reporting Standard (CRS) which calls for all financial institutions to automatically exchange information annually with other jurisdictions. HMRC began to receive information under the UK’s Automatic Exchange of Information Agreements from October 2018. 

This means that offshore financial institutions have a duty to report information to HMRC, including but not limited to:

  • Name and address;
  • Country of tax residence;
  • Total value of your accounts at the end of the calendar year; and
  • Income produced in the account (i.e. interest and dividend income, proceeds on the disposal of assets etc.)

What does HMRC do with this information?

HMRC analyses the data received and compares this to what is reported on an individual’s tax return.

If HMRC discover non-compliance where income and / or gains have been omitted from an individual’s tax return, severe penalties can apply. 

The actions which HMRC are able to take, include:

  • assessment of penalties against Individuals ranging from 100% to 300% of tax due on undisclosed income (in some cases, an asset based penalty may also apply);
  • any entity that fails to prevent tax evasion can be liable to unlimited fines; and
  • possible strict liability criminal offence for failure to report offshore income or gains.

To enable HMRC to sort through the high volume of information provided under the CRS, timeframes in which HMRC may raise an assessment into an individual’s tax return have been extended to 12 years (extended to 20 years where HMRC deems there to be deliberate tax evasion).

The level of penalty assessed will depend on various factors, including:

  • if the disclosure was prompted by HMRC or voluntary by the individual;
  • if the non-compliance was deliberate and / or concealed; and
  • if the individual has a ‘reasonable excuse’ for non-compliance (i.e. if the individual received advice from a tax adviser).

Do I need to make a disclosure to HMRC?

It is important to review your previous tax filings to ensure you have been compliant. If you are in any doubt, we are available to assist in reviewing your offshore assets and to advise on whether a disclosure should be made.

If you believe a disclosure to HMRC needs to be made in order to declare previously omitted income or gains, our team can assist with making a disclosure through HMRC’s ‘Worldwide Disclosure Facility’.

We are further available to assist by:

  • calculating additional tax due and estimating penalties to be assessed; and
  • corresponding with HMRC on your behalf, including in relation to any queries which arise due to the disclosure and negotiating the best possible outcome.

Julian Nelberg

Julian is Head of the Private Client group at Andersen Tax in the United Kingdom. His clients include international high net worth individuals, senior executives, trusts and companies.

Email: Julian Nelberg