Justin Stevenson, Director in Buzzacott’s Tax Disputes and Investigations team, has spoken to Spear’s about new detail in some of HMRC’s letters on overseas income and gains, and what it means for anyone who has received one.

In recent weeks, several Buzzacott clients have received nudge letters from HMRC about their overseas income and gains. These letters now include something new: a schedule setting out the offshore data HMRC holds on them.

Justin discussed the change with Spear’s in a recent article.

What has changed?

For many years, HMRC has sent nudge letters to taxpayers it believes may not have fully declared their overseas income, assets or gains. The letters invite recipients to put matters right through the Worldwide Disclosure Facility (WDF). The WDF is HMRC’s route for disclosing tax owed in connection with an offshore issue. Justin told Spear’s that this is the first time he has seen HMRC include specific offshore data in WDF nudge letters of this kind, along with where that data came from. The schedule names the financial institution that reported the information, describes the amount reported and gives the tax year it relates to.

The letters also ask recipients to check that they have declared all their UK tax liabilities, not only those connected to the items in the schedule. Justin noted that the new format has appeared only in the past couple of weeks. It is not yet clear whether every WDF letter going forward will include it.

Why does it matter?

Justin described the change as “a welcome step towards transparency from HMRC”. Knowing exactly which account and which year prompted a letter makes it much easier to check the position and respond accurately. He also stressed that the letters should not be ignored. Anyone who fails to respond but is later found to have undeclared tax liabilities risks significantly heavier penalties. If overseas income or gains are missing from a tax return and the taxpayer does not come forward through the WDF, HMRC is likely to open their own investigation.

If you have received a WDF nudge letter:

• Don’t ignore it, and note any response date it gives

• Check the schedule against your own records and the tax returns you have filed

• Look beyond the schedule: HMRC expects you to review all your income and gains, not only the items listed

• Take professional advice before replying, whether you need to make a disclosure through the WDF or confirm that your tax affairs are in order

How can Buzzacott help?

Our Tax Disputes and Investigations team advises individuals, businesses and trustees on offshore tax matters. That includes reviewing the data in a nudge letter and preparing and submitting a disclosure through the WDF.

If you have received one of these letters, fill out the form below and one of our team will be in touch.

Read the full article on Spear’s.