Advisers warned over compliance as HMRC writes to non-doms

Advisers warned over compliance as HMRC writes to non-doms

Advisers should keep up to date with their non-domiciled clients’ movements to avoid being liable for criminal charges, an expert has said after letters were sent by HMRC warning non-doms about tax evasion.

Gary Ashford, partner at Harbottle & Lewis, told FTAdviser advisers could face serious consequences if they allow non-dom clients to evade tax.

"The one thing financial advisers can't do is turn a blind eye to the behaviour of a client," he said.

"[Tax evasion] is almost a bigger deal for the adviser than it is for the non-dom themselves."

Under the Criminal Finances Act 2017, financial advisers can be committing a criminal offence if they are aware that a client is evading tax.

Ashford added that in the past five years HMRC has heightened its focus on cracking down on so-called ‘enablers’.

“So it's not just about the non dorm who's getting a prod to pay the remittance basis charge, it's also about 'well if there is a non-dom who hasn’t paid, who knew about this',” he said.

Nudge letters

Last week, HMRC sent a number of ‘nudge’ letters to non-doms who it believes have failed to declare and pay the remittance basis charge for the 2019/20 tax year. 

The charge is owed by those who are registered as non-domiciled but have lived in the UK for seven years out of nine (or 12 years out of 14).

Non-domiciled status is for UK residents who have their permanent home outside the UK. It means they do not have to pay UK tax on foreign income, provided the income is less than £2,000 in each tax year and is not brought into the UK.

However, after seven years of residency, non-doms will have to pay £30,000 in order to continue paying tax on solely their UK-based income and capital gains. The charge then rises to £60,000 if the non-dom has lived in the UK for 12 out of 14 years.

The letter said most people who claim the remittance basis want to get things right but do not always understand the reasons why a remittance can occur. 

It added: “We want to help you get your tax affairs right,. This is to avoid unnecessary contact and expense. 

“We are seeing common errors with some of our customers in this category.”

The taxman added it believes that some customers have either not made a claim to the remittance basis correctly in their self-assessment tax return, not ticked the long term residence box that applies to the number of years they have been resident in the UK, or have incorrectly claimed the remittance basis instead of being taxed on the arising basis.

Those contacted have 60 days to take action.

Ashford said the starting point for financial advisers was to understand the non-dom rules.

“Within that, they need to have systems (and probably regular contact) with clients to keep an eye on whether they’re following the rules of the non-dom system.

“As part of that they need to know the number of years that the remittance basis charge starts to come into play.”