Tax  

Owning up to clients' offshore assets

  • Describe the importance of the Common Reporting Standard
  • Outline when there's a risk of prosecution
  • Describe the benefits of proactive disclosure
CPD
Approx.30min
Owning up to clients' offshore assets

Tax authorities around the world have been receiving large amounts of data under the Common Reporting Standard, and are now utilising this information to follow up with the taxpayers concerned.

In a nutshell, CRS means that financial institutions such as banks and trust companies now automatically report their clients’ interests in offshore assets to the ‘home’ tax authority.

As a result, HM Revenue & Customs has been endowed with an unprecedented level of data regarding UK individuals with interests in assets overseas.

There are many years’ worth of data to plough through, so HMRC must do this quickly and efficiently, otherwise there is a danger that much of this information will never be analysed and opportunities will be lost.

Following receipt of this data, HMRC has been writing to tens of thousands of taxpayers, asking them to sign a formal document certifying whether their tax affairs are in order, or whether they need rectifying.

The certificates highlight that there is a risk of prosecution if taxpayers “make a false statement or complete a false certificate,” which leaves people open to possible criminal investigation if an error is later found in their tax history, even if such an error arose because of oversight rather than something more sinister. 

Despite these letters being sent and received, there is actually no statutory requirement to sign the certificates, or even to reply to HMRC at all.

That said, the letters should not be ignored. HMRC’s assertion that assets exist overseas is based on solid evidence and it is a fact of life that UK tax attaching to offshore assets and structures can be extremely complex.

Mistakes based on technicalities are not overly unusual, nor are irregularities that arise because the tax compliance has not kept pace with changing tax laws. As far as offshore matters are concerned, both the rate and amount of change has been significant, so it is possible - and not uncommon - to have fallen behind without immediately realising.

Although recipients of these letters from HMRC should not necessarily complete the certificate, it is advisable that, in the first instance, they consider their position carefully and ensure that nothing has been overlooked.

Given how complex offshore tax matters can be, it is recommended that this is done with the help of a specialist adviser. Naturally, if it is discovered that tax is due, then it should be declared immediately.

There are several ways to do this, including HMRC’s ‘Worldwide Disclosure Facility’ for more straightforward cases, or the ‘Contractual Disclosure Facility’ for more serious cases where HMRC might otherwise be able to consider prosecution.

Careful consideration should be given to matters, such as: where any disclosure should be directed within HMRC, what years the disclosure relates to and whether any can be validly excluded from the calculations, how to make the disclosure, and how to mitigate any penalty implications should they arise.

CPD
Approx.30min

Please answer the six multiple choice questions below in order to bank your CPD. Multiple attempts are available until all questions are correctly answered.

  1. What does the common reporting standard mean?

  2. When is there a risk of prosecution?

  3. There is no statutory requirement to sign the certificates, true or false

  4. Which of the following is NOT something that should be considered when making a disclosure:

  5. HMRC is taking a quite lighthearted approach to compliance, true or false?

  6. Which of the following is NOT a benefit of making unprompted disclosure of liabilities:

Nearly There…

You have successfully answered all the questions correctly, well done!

You should now know…

  • Describe the importance of the Common Reporting Standard
  • Outline when there's a risk of prosecution
  • Describe the benefits of proactive disclosure

I completed this CPD in

To bank your CPD please complete the form below.

Were the stated learning objectives met?

Why weren't they met?

What did you learn from undertaking this CPD exercise?

Why did you undertake this piece of learning?

Banked!

Congratulations, you have successfully completed and banked this piece of CPD

Already Banked!

You have already banked for this article.

To bank your CPD you must or

Register

One or more questions have been incorrectly answered,
 please review your answers and try again.

Please complete all the above text fields to bank your CPD.

More Investments CPDSee my completed CPDSee all CPD