So we have now had another chapter of the saga of secret bank accounts with the Pandora Papers. Just like their forerunners, it makes interesting reading – but so what. The “offshore world” exists because of demand – the demand for discretion and privacy. It’s no secret, it’s just none of your business!
But yet again, HMRC are issuing nudge letters on “Your overseas assets, income and gains”.
Is it wrong to have an offshore asset?
Is it illegal to have an offshore asset?
So why is it in the media, again?
Very few taxpayers use the “white space” on Tax Returns
If you think about it just for a moment from HMRC’s point of view, what would you think if you suddenly found out about somebody’s assets overseas.
- Why overseas and not in the UK?
- Is somebody trying to hide something?
- Where did the money come from to buy the asset?
- What income (or gains) are generated from the asset?
If there is no explanation offered, is it any wonder that HMRC may want to ask a question or two.
Secrecy or discretion?
To my mind it doesn’t matter which heading it falls under. How much you earn and how much you own is “just none of your business!”
But I can understand why all this can help HMRC in its care and management role of the UK tax system. Therefore for HMRC to be told under the Common Reporting Standard is not a bad thing as Inspectors have to sign the Official Secrets Act.
Tax evasion is a crime
Tax avoidance is not. HMRC seem to have blurred the edges somewhat over the years. The two are quite different but both can easily be linked to “offshore anything”.
Taxpayers can be forced to go through the emotional turmoil and financial cost of getting somebody to delve into their private finances only to find nothing wrong.
The only item identified could be the mere existence of an offshore bank account, trust or company. Moreover, there was no income or gains. The asset was bought and maintained out of declared income that had been properly taxed.
There was no tax irregularity let alone any tax evasion.
One letter to HMRC was all that it took in the end to explain matters. Identifying who to talk to within HMRC was the biggest challenge. If HMRC’s letter had been ignored, it could easily have been a lengthy investigation under Code of Practice 8 or 9.
Should I ignore a “nudge letter”?
How do I avoid being challenged by HMRC?
Use the “white space” on a Tax Return to explain an inheritance or any unusual matter that impacts upon your personal finances. Tax Returns are processed by computers in the main. But before launching an enquiry, HMRC are supposed to read the “white space” first. If worded correctly, your explanation can negate the need for a full blown tax investigation.
What if I am being challenged at the moment?
Seek specialist advice. Give me a call on +44 (0) 7979 313 010.