As HMRC cracks down on undisclosed income; help is at hand

HMRC has for some time targeted those individuals it believes as having not declared offshore income and gains but is now adopting an increasingly proactive position with everyone it believes has yet to fully disclose.

After a period of high spend and the highest rate of borrowing since the second world war, it is no surprise that the government is wanting to recoup losses and we were forewarned in Rishi Sunak’s budget speech that HMRC would be tightening up in this area. Here at Mercer & Hole, we have seen a marked increase in the UK government writing to individuals that were late in filing tax returns, that have yet to settle taxes due and ‘nudge letters’ to those it believes have undisclosed offshore income and gains that they have yet to declare.

In some instances, HMRC is asking individuals it suspects to have undisclosed offshore income and gains, to sign a certificate stating that they have disclosed all their declarable offshore income and gains or that they need to bring their tax affairs up to date using the Worldwide Disclosure Facility (WDF). However, it does not necessarily make it clear that such a declaration is voluntary and the WDF may not be the most appropriate approach for a disclosure, particularly if the situation is complex. Private Client Partner, Henry Lowe says: “HMRC is also adopting a more direct approach suggesting that it has information that could result in criminal offences or prosecution for individuals if they do not act.”

This letter will cause a deal of anxiety for every recipient but at Mercer & Hole we would urge caution with regards to signing this certificate even if you believe your reporting is correct. HMRC does not explain that there is no legal obligation for the declarations to be completed and can be more appropriately addressed by a response from their accountant and not the individual in question. Henry explains: “In our experience these letters are often being prompted by situations where there is nothing to declare, for example where tax free withdrawals have been made from offshore bonds.”

Instead, we would urge anyone approached by HMRC to take advice from their accountant before responding or signing anything. At Mercer & Hole, we can offer support and advice if this applies to you. We can deal with HMRC and will ensure that your reporting is watertight and complies with regulations to take the stress out of tax declarations for you.

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If this affects you as an individual or if you have any concerns with regards to tax declarations, please don’t hesitate to contact Henry.