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The reasons are numerous, some reality and some perception.

The reality is that offshore has been used historically to “hide” things, and not necessarily just from HMRC. “What they don’t know they can’t grieve about”. HMRC has historically perceived offshore to be a tax pot that has rarely been accessed.  It simply didn’t have the transparency and information to open the taps.

HMRC’s approach was more accidental than planned; it would only pursue matters when it stumbled across them. The reality and HMRC’s perception fomented HMRC’s growing interest in offshore and lead to the “No Safe Havens” strategy in the early 2010’s. HMRC’s interest has remained firmly on offshore ever since.

 

Access to data

One of the driving forces behind the revenue’s perception, and activity, is access to data. Things like the FATCA (with the US), a series of Directive’s on Administrative Cooperation (DAC’s) with the EU and bi-lateral agreements with Crown Dependencies and overseas territories have added to the data flow.

HMRC’s belief in the success of these initiatives lead to the UK (and HMRC particularly) being an advocate and sponsor of an even wider information sharing initiative, the Common Reporting Standard (CRS), brokered through the OECD. CRS is now the bedrock on which HMRC bases most, if not all, it’s offshore interest and activity.

HMRC now has evidence whereas it previously had hope.

 

How are HMRC targeting assets abroad?

With greater access to data came a requirement to do something with it, HMRC recognized it needed to tool up. Within the walls of HMRC, someone wisely realised that their historic experience with tech based projects was patchy at best. British Aerospace therefore developed a sophisticated data analysis and interrogation tool.  The birth of CONNECT.

CONNECT works.  Over 90% of HMRC interventions now use CONNECT and it is the primary filter for the generation of “Nudge Letters”.

 

Initiatives and Facilities

In tandem with access to data and the tools to use it,  a number of initiatives to allow taxpayers to bring their affairs up to date have been announced in recent years. These have given a “last chance” opportunity to taxpayers; before HMRC switched into policing mode.

The opportunities such as the Offshore Disclosure Facility (ODF), Liechtenstein Disclosure Facility (LDF), the Swiss Accord, the Crown Dependency Disclosure Facilities etc have all terminated. This approach allowed HMRC a bit of breathing space to get to grips with large amounts of data and specifically what they were going to do with it. The initiatives kept the tills ringing.

The Worldwide Disclosure Facility (WDF) has replaced these initiatives. The WDF is formulaic.  HMRC push it as the solution to “Nudge Letters”.

The data grab has, to a degree, resulted in a one size fits all approach, it doesn’t.

 

Technical failures

What sits behind many offshore issues are technical corrections or failings.

Where HMRC can see the issue is beyond formulaic, they are raising challenges into matters such as:

  • Transfer of Assets Abroad (ToAA)
  • Non-resident landlord (NRL)
  • Non-resident capital gains tax (NRCGT)
  • Inheritance tax (ten yearly and proportionate charges)

The above are not exhaustive and we are seeing other areas being pursued as well.

 

We are dealing with a range of instructions involving all the above and have detailed knowledge on how HMRC are targeting assets abroad.
We have a wealth of experience dealing with overseas issues, if you need help please get in touch with Andy for help and advice.

If you cannot find the information you need on our website, please contact Andy Maxfield using our contact form or email directly to amaxfield@hwca.com

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