HMRC’s efforts to combat offshore tax evasion have been boosted following the receipt of the 2018 wave of financial information under the Common Reporting Standard (CRS), says Bill Duggan, tax manager at law firm Edwin Coe.

As a result of this data, HMRC has issued letters to individuals stating that they have information that indicates that the taxpayer has received foreign income and/or gains which may be taxable in the UK.

The letters state that the information has been received via exchange agreements with other countries.

These ‘nudge’ letters are designed to encourage people to consider their tax position. The current examples acknowledge that the vast majority of people declare their taxable income and gains and point out that changes in the law or in one’s personal circumstances can render previous advice obsolete or out of date.

This links to HMRC’s recent campaign where they stated that reliance on out of date advice could lead to individuals falling foul of the new increased penalties levied under HMRC’s Requirement To Correct (RTC)/Failure To Correct (FTC) regime, effective since 1 October 2018.

Attached to the letters is a ‘Certificate of Tax Position’. This instructs individuals to sign a statement that either: their tax affairs need to be brought up to date and a formal disclosure will follow; or they have declared all their income and gains.

It also includes a warning that making a false statement can be a criminal offence, which could result in prosecution.

However, it is not mandatory to sign the certificate and Mr Duggan says he would “strongly advise” individuals to seek professional advice before making a decision.

It’s likely that if you receive a ‘nudge’ letter of this type, HMRC has received information about you from an overseas authority.

“However, it does not follow that there is anything wrong or that you need to either sign the certificate or make a disclosure,” Mr Duggan added.

Tax director Dmitri Surendran, who was formerly operational head of HMRC’s Offshore Investigation Unit in London urged individuals not to ignore the letters.

“They have been issued as a result of information held by HMRC. If the letter prompts your memory of any overseas income or gains which have not been previously disclosed it is strongly recommended that you seek professional advice. This will help to diminish the possibility of a criminal investigation and also mitigate the draconian penalties for Failing to Correct.”

This article was published by ePrivate Client.

For the full blog from Bill Duggan, please click here.

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