Signing letters from HMRC on overseas income could result in increased tax penalties

August 12, 2019

HMRC have been sending out tens of thousands of letters to remind taxpayers with overseas bank accounts and investments, that by law they are required to declare any income received.


The letters are being sent to anyone with a foreign income, regardless of whether tax is currently owed and receiving the letter does not necessarily indicate that a tax is due. 


However, it also requests that the letter is signed and returned and omits to explain that when signed, it could mean that the individual could be subject to higher tax penalties as part of future investigations, should HMRC find errors in their accounting.


The letter clearly explains that that overseas income includes rent from properties abroad and interest from foreign bank accounts and investments.  But, it does not clarify that when returned signed, it could prevent the taxpayer from being able to claim an unprompted disclosure of a mistake, which may then result in higher penalties.


Verifying the consequences when talking to a reporter from The Telegraph, an HMRC spokesperson has confirmed that “Once a letter is returned, we will take into account the fact that the recipient has confirmed his or her tax affairs are up to date, however if during any subsequent investigation HMRC find the recipient was wrong, they could face a higher penalty.”


In addition, HMRC are only allowing one month for individuals to complete a review of their tax obligations, and for many this is likely to be insufficient time to properly review their affairs, and be happy to sign this declaration, especially given the potential consequences described above.


What many taxpayers do not realise is that it is clear that HMRC is not entitled to compel a taxpayer to sign a declaration such as this and in many cases it may not be the right thing to do so.


Failure to respond at all however is also unlikely to be an appropriate option as it will probably result in further correspondence and potentially trigger a formal inquiry.  


Should you be concerned as to what action to take regarding this letter, or any other aspect of your tax affairs, please contact our offices for further information and advice.

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