Expats on foreign assignments who remain British taxpayers should consider tough new tax avoidance rules about to take effect if they have undeclared cash and investments overseas.
The countdown to ‘requirement to correct’ is already underway – and is linked to a global network of tax authorities sharing data.
The warning for expats is if you have undeclared income and investments overseas, HM Revenue & Customs is likely to uncover the information.
Requirement to correct rules became law in November 2017, but many expats are unaware of the consequences.
Under the measure, any UK taxpayer with a potential undeclared income tax, capital gains tax or inheritance tax liability must update their tax position with HMRC by September 30.
Global tax reporting network
From October 1, failure to file could mean hefty fines of up to 200% of any ‘avoided’ tax plus a penalty of up to 1-% of the value of any undisclosed assets.
HMRC is confident details of any foreign cash or assets will be disclosed by overseas tax authorities under the common reporting standard.
Under the common reporting standard,50 countries trade financial information about each other’s taxpayers that have bank accounts or investments in their jurisdictions. The list includes the UK and the leading offshore territories and dependencies considered tax havens, such as British Virgin Islands, the Cayman Islands, the Isle of Man and Guernsey.
In the UK, this is cross-checked against tax returns by HMRC to make sure the right amount of tax is paid.
What expats should do
Tax experts are warning expats or other UK taxpayers with undeclared foreign cash or assets that they must act before September 30.
“These two measures are further reminders that tax cannot be ignored by merely placing assets overseas. If clients have any doubts about the tax position of assets held overseas, they need to act before the RTC deadline, which is less than six months away,” writes Tony Wickenden in financial media Money Marketing.
“At the same time, however, it is important to remind clients this does not mean there is something intrinsically wrong with holding offshore investments. Offshore bonds and offshore funds (reporting and non-reporting) have very clear tax provisions attributed to them in the UK tax code and can be held with impunity by UK resident and domiciled taxpayers – provided the reporting and declaration requirements of UK tax legislation are complied with.
“The same is even true for offshore bank accounts. Nothing wrong with them; just declare any income that they may generate.”