Taxman in offshore income account squeeze
A clampdown on offshore accounts which HMRC threatens could have “life-changing consequences” should not -- for once -- affect most contractors.
In fact, an advisory believes contractors will emerge largely unscathed from the Revenue's threat of criminal prosecution for failing to disclose foreign income or capital gains.
It’s because most contractors have offshore accounts that they are obliged to report already, rather than those that HMRC regards as income-generating -- the focus of the new clampdown, says WTT Consulting.
“Even where loans are owned by trusts of which contractors are beneficiaries,” said WTT’s Graham Webber, “there are already reporting requirements on trustees and in the majority of instances, no interest being paid and hence no income.”
Under the clampdown, advisers and financial institutions must inform their clients of the risks of holding undeclared, income-generating offshore accounts, and how to act if they do.
So making a disclosure to HMRC is outlined in letters that the advisers and institutions are having to send to their clientele (at the Revenue’s behest), as is potentially using the Worldwide Disclosure Facility or Contractual Disclosure Facility (CDF).
Although the CDF is likely to be familiar to some contractors, WTT’s Mr Webber says most contractors are not directly in the crosshairs of the clampdown, which will be reinforced when HMRC gains information on assets held in more than 100 countries.
“The proposal is to force advisers to tell HMRC about their client’s offshore accounts… [where those accounts] may produce some income,” he said. “[So] for once, I think contractors are not in the line of fire.”
In one adviser letter doing the rounds, the recipient is warned of the Revenue threatening -- in its words, of “further penalties based on the value of the asset as well as the tax due, resulting in potentially life-changing consequences.”
However, advisers are also reminding their clients that UK taxpayers with overseas investments are compliant with HMRC as long as they have declared all taxable income and gains on their UK tax return.