On occasion HMRC send out letters to individuals who they believe have received income, gains or assets from overseas. These letters are not blindly sent out, rather HMRC rely on information garnered from the Automatic Exchange of Information (AEOI). These are agreements made between certain countries’ revenue raising authorities. Another round of these letters will be sent out shortly.

Hand holding a letter

Receiving a letter from the worldwide disclosure facility

So what should you do if you receive one of these letters? Firstly if you receive one do not panic, it could be that you are already correctly declaring all of your income. In these instances, simply sign HMRC’s declaration included in their letter, which states that your income is “correct and complete to the best of your knowledge and belief”. In these circumstances, it may be worth your time sending a covering letter explaining your foreign income and how you have been declaring this.

The area of tax surrounding domicile, remittance and residency status can be complicated and there are many instances of individuals receiving money from foreign sources, which are not being declared in the UK. Usually there is no deliberate intention to not inform HMRC, just a lack of understanding on what does and what does not need to be declared in the UK.

Prompted disclosures

If you are reading this blog and you have yet to receive a letter from HMRC but are suddenly very aware that there may be income you should have been declaring then you are in luck. HMRC will usually charge lower penalties than those they charge if you are ‘prompted’ by one of their letters. For ‘prompted’ disclosures, the penalties could be up to 100% of the unpaid liabilities, or up to 200% for offshore-related income.

Whether you have or have not received this letter, if you are unsure of your position I would recommend talking to a tax adviser. Stilwell Gray can certainly help you understand your tax position and what, if any action needs to be taken.

If income does need to be declared a disclosure will need to be made via HMRC’s worldwide disclosure facility and Stilwell Gray can do this for you on your behalf, working with HMRC to get the best penalty outcome for you.