Taxpayers pushed to ‘certify’ offshore income

HMRC has recently sent tens of thousands of letters to UK taxpayers, stating that they have information regarding their offshore income or gains. This is a result of recent information exchange agreements with more than 100 countries over the past 2 years, and includes data sourced from financial institutions in countries once regarded as tax havens. The letters originate from the Risk and Intelligence Service Offshore department, who ask individuals to disclose to them any additional liabilities, or to state whether there are none.

HMRC include a certificate with the letter, and they ask that this is completed and signed, which includes a statement to show that the individual “understands that choosing to make a false statement or complete a false certificate is a criminal offence that can result in an investigation and prosecution”. This statement deliberately goes above and beyond the usual declaration made in the Self-Assessment tax return “I confirm that the information I have given is correct and complete to the best of my knowledge “. This Offshore income letter can be issued to individuals, regardless of any Self-Assessment Tax Return they may already have completed which includes the offshore income in question. It is therefore easy to see how this can create confusion and concern for taxpayers, especially because the letters do not specifically disclose what information is held by HMRC on the recipient.

UK Taxpayers could place themselves at significant risk of increased financial penalties and/or criminal prosecution if they complete the certificate, because it does not specify which time period it relates to. Many could view the certificate as relating only to last years Tax Return details, without appreciating that technically HMRC could correct any tax errors going back some 20 years, and this is a definite risk,  given it is not uncommon for internationally mobile individuals to simply lose track of  historic assets, for example bank accounts opened when working overseas. This action comes as HMRC seeks to increase its powers to investigate mistakes in tax returns on foreign assets.

The certificate has no legal status, and we would recommend that they are not completed, however, neither should they be ignored. If you do receive a letter enclosing such a certificate, please contact us and we will be happy to advise you accordingly.

To find out more please contact Lynn Gracie, Stuart Petrie or your usual AAB contact.

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