LONDON – The UK tax collector is sendingletterswarning of the “potentially life-changing consequences” of failing to disclose offshore-held wealth, as part of a drive to prevent people skirting tax rules.
Millions of UK taxpayers are being sent the warning via their financial institutions and advisers.
These institutions have been given until the end of August to explain to all clients the risks of failing to declare offshore-held money and assets.
“Penalties are increasing for those who are not paying the right amount of tax on their offshore assets, and you can even face criminal prosecution,” the one-page warning from HMRC said. “Under new rules, you could face further penalties based on the value of the assets as well as the tax due, resulting in potentially life-changing consequences.”
Holding assets offshore is not illegal, as long as all taxable income and gains are declared on a UK tax return. But there are many ways, both legal and illegal, that businesses and individuals can stash assets offshore, in order to pay less or no tax on them. Many offshore jurisdictions also allow people to maintain high levels of secrecy, since they are not subject to the same transparency laws as apply in the UK.
Under new transparency rules, however, information sharing between more than 100 countries will allow HMRC to crack down on individuals who are trying to evade tax they should be paying, the warning said: “The world is becoming more transparent.”
Overseas institutions such as banks and insurers, it goes on, have already begun supplying such data to help HMRC “identify the minority who are not paying what they owe.”
It urges people to “come to us before we come to you,” and encourages reporting any undeclared taxable assets via a “worldwide disclosure facility.” Although this will result in penalty charges of up to 200% of what is unpaid, penalties are due to rise further from September 2018.
Since it would entail a huge amount of work for financial institutions to check which of their customers may have offshore-held assets, the warning is being sent out to most customers. However, it includes an assurance that those whose tax affairs are up to date and complete need not take any action.
“We have ended up having to send them to almost everybody,” Tina Riches, a partner of investment management firm Smith & Williamson, told the Financial Times. But, she said, “it does smack of us doing HMRC’s work.”
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