HMRC (Her Majesty’s Revenue and Customs) is currently tightening up and enforcing its laws regarding foreign assets that could affect UK income tax. This comes after it’s “requirement to correct” (RTC) legislation which “forces taxpayers to tell HM Revenue & Customs about any offshore tax liabilities relating to UK income tax, capital gains tax or inheritance tax” came into effect on 30 September of this year.
Investors were made aware in advance of the pending legislation, and those who notified the HMRC before the legislation came into force were given an additional 90 days to declare any offshore assets and pay the relevant tax due. However, it’s not as clear-cut as it may seem and some investors may be in for a shock. From ft.com,
“Many investors will be unaware that they have a taxable event because they logically believe that HMRC taxes them only on income they receive,” said Nimesh Shah, partner at Blick Rothenberg, the accountancy firm. “The real sting is that while investors don’t think they have anything to declare the tax rules say otherwise. The rules stipulate that taxpayers need to put ‘excess reporting income’ on to their tax return and pay tax on it, even if the fund has chosen not to distribute it to the investor.”
Penalties for those who have failed to pay or paid the incorrect amount of tax due will be severe. Individuals who not rectify their tax matters by the deadline will face a fine of 200% of tax owed. Furthermore, if tax over any one year exceeds £25000 and the individual responsible was knowingly avoiding payment, they could face a penalty of up to 10% of the value of the assets.
The new legislation is part of a bigger crackdown on offshore tax evasion, and the HMRC’s patience has grown thin. “Complacency will not be tolerated particularly as there are billions of pounds on the line,” said Rachael Griffin, tax and financial planning expert at Quilter.
Of course, there is nothing to fear for those who have their tax matters in order, in which case offshore assets are an excellent investment. The current state of the property market in Cape Town is ripe for investment, and there’s no better than Berman Brothers to facilitate the purchase.
Their portfolio comprises the most sought-after properties in the region and their team of dedicated sales agents – who eat, sleep, and breathe ‘property’ – will not rest until a perfect match is found.