aim key cog flag clipboard-pencil podium flare signal lamp pie-chart graph scale2 hammer2 balance traffic-lights road archery wall share2 warning notification-circle circle-minus prohibited book book2 bookmark

Call your nearest office

Or ask us a question

Search our site

What are you looking for?

share

Most taxpayers are aware that if they receive income in the UK, subject to reliefs and allowances, it will be taxed. What is less well known is that UK residents are taxable on their worldwide or offshore income, whether it’s received in the UK or not.

A former client with rental property in Dubai openly commented “but it’s tax free in Dubai”, which it was.

However, he was a UK resident taxpayer and it wasn’t tax free in the UK.

 

Simple tax problems

The problem may arise from simple origins.  Decades ago, UK taxpayers with savings deposits were, on occasion, promoted overseas accounts by financial institutions as the interest earned did not incur tax at source.

Factually that was often correct, but it didn’t stop the interest being subject to tax in the hands of the UK taxpayer.

Slightly more complicated problems can arise if, say, a family legacy is held overseas but remits income and or gains to legatees.  It is not the original source of the legacy that can be the problem, it’s the character of the subsequent payments.

 

Growing tax problems

One tax problem, that can grow in size, can originate from the ownership of overseas property, e.g. a holiday villa.

What starts out as a family escape can grow into a tax problem.  As time passes and perhaps the owners and/or family use the property less and less it can become a financial burden.  The owners then look to secure some return from the property to cover costs, it starts being rented out and that’s when problems arise.

Firstly, it’s likely the commencement of rents will create a tax obligation in the country where the property is located.  Secondly, the receipt of rents is likely to trigger a tax return requirement in the UK for a UK resident taxpayer.

Double reporting of the same matter and taxed twice on the same, although the UK does allow Foreign Tax Credit Relief for foreign taxes paid.

A simple act of covering costs on the property opens up numerous reporting obligations that didn’t exist beforehand.

 

Technical tax problems

A tax problem can arise from changes in legislation.

HMRC will not have much sympathy with any taxpayer who advances comments like “We followed what great uncle Bob did back in the 1950’s”.

What may have been fine in the 1950’s should not be assumed to be fine in 2020, legislation changes and can have a bearing on the taxation position.

 

Residence and domicile

The above does not comment on the residence and/or domicile of the taxpayer, both of which can complicate matters even further.  Potentially positively but also negatively as well.

 

HMRC scrutiny

HMRC regularly receives information under the Common Reporting Standard (CRS) from overseas.  The type and quality of information is growing year by year.

The absence of a HMRC challenge is often due to lack of resource rather than intent.

However, the absence of a current challenge presents an opportunity to correct matters before HMRC finds the problem itself and commences intrusive scrutiny.

Avoid being a sitting duck, take appropriate advice.

 

We have a wealth of experience dealing with matters involving offshore income, assets and HMRC.
Get in touch with us 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

Be the first to comment

Get in touch

Whatever issue or question you have, we’ve got the answer.
If you want to get in
touch then please complete our form.

Birmingham

Sterling House
71 Francis Road
Edgbaston
Birmingham
B16 8SP

Leeds

Sterling House
1 Sheepscar Court
Meanwood Road
Leeds
LS7 2BB

London

New Derwent House
69 – 73 Theobalds Road
London
WC1X 8TA

Our addresses

Birmingham

Sterling House
71 Francis Road
Edgbaston
Birmingham
B16 8SP

Tel: 0121 456 1613

Leeds

Sterling House
1 Sheepscar Court
Meanwood Road
Leeds
LS7 2BB

Tel: 0113 3981100

London

New Derwent House
69 – 73 Theobalds Road
London
WC1X 8TA

Tel: 0207 025 4650