Offshore fund holders targeted by HMRC

April 20, 2020

In a further tax compliance crack down at the end of 2019, HMRC began to target offshore fund holders.  Mailing out to some of the country’s most affluent taxpayers, the letters were sent by the Wealthy and Mid-Sized Business Compliance arm of HMRC.  They included a fact sheet of additional details reminding investors that significant tax complexities can be created by such holdings, and that extra diligence in their tax reporting is required in order to ensure that dividends and gains are correctly declared on their returns.

The campaign reminds taxpayers to check the type of offshore fund they have invested in, and an HMRC briefing note states that they are: “Tackling these risk areas through preventative measures by issuing this ‘one to many’ nudging letter directly to a subset of the wealthy population identified as being at the greatest risk of falling victim to these errors.”

 

A collective investment fund can also be known as a unit trust, investment trust or open ended investment companies (OEICs) and are investments that utilize funds from several investors to minimize risks.  Always with a professional fund manager, the most popular assets are property, listed shares and other funds, some of which are exchange traded funds that track indexes without any active management.

 

A further round of the letters advising taxpayers that HMRC have received information regarding offshore asset holdings or offshore income and gains, and to ensure these have been correctly reported on their tax returns was then issued in February and March this year. These letters are also accompanied by a certificate for the taxpayer to sign, confirming their tax affairs are up to date or that they will be making a disclosure via the Worldwide Disclosure Facility.

 

Global data sharing agreements have enabled the HMRC to crack down on both intentional and ‘honest error’ tax evasion more efficiently, and in 2015 HMRC recouped over £400 million from high net worth individuals who had a collective wealth of in excess of £20 million. The amount recovered was in addition to the £4.3 billion that had already been declared voluntarily in 2014–15, but HMRC believe that in excess of £1.6 billion still remains unpaid.  It seems therefore that there is no end in sight for HMRC’s focus on offshore assets and the resulting income and gains they generate.

 

For further information, or help to ascertain whether you may be at risk of not fully reporting all gains from offshore collective investment funds, please contact our dedicated team on 01932 320800 or email info@everfairtax.co.uk.

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