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Tax Amnesty
Tax Amnesty
Interesting article on The Revenue's current tax amnesty, expires June 22nd on reporting previously undeclared income on overseas assets..
[/b]The government will this week announce an unprecedented amnesty for hundreds of thousands of people with offshore assets, including holiday homes, as it seeks to recover billions of pounds in unpaid tax.
Taxpayers will be given two months to declare unpaid tax on rent from foreign properties, or on cash stashed in accounts in the Channel Islands and other tax havens. Those coming forward will be charged a reduced penalty of 10 per cent compared with 100% in normal circumstances.
Once the amnesty expires in June, Revenue & Customs officials are planning a crack-down on offshore assets using aggressive new powers including sharing information with tax authorities abroad.
The reprieve applies not only to dishonest taxpayers who have wilfully withheld tax, but also to ordinary people who may have innocently underpaid tax because of a simple mistake, or who may not realise they had to declare overseas income. The Revenue estimates that as many as one in five people are not declaring overseas interest.
Related Links
What should you do now?
Property boom moves overseas
The amnesty was expected to apply only to savers with bank accounts in offshore centres such as Jersey, but The Sunday Times has learnt that at the last minute it has been quietly extended to people who own second homes abroad. An estimated 300,000 British people have bought properties overseas, most of them in France and Spain, and about half are thought to earn an income by letting them out for at least part of the year, according to Grant Thornton, an accountant.
Thousands of holiday-home owners now face an anxious few weeks trawling through their records and deciding whether to own up now, or face much higher penalties once the two-month amnesty ends on June 22.
Revenue & Customs has vowed to “track people down” who fail to cooperate, launching a full-scale investigation into their tax affairs that could stretch back up to 20 years. Anyone caught could face prosecution as well as a 100% penalty.
Chas Roy-Chowdhury of the Association of Certified Chartered Accountants said: “The Revenue is sending out a clear message to taxpayers that this is their last chance to own up to undeclared offshore assets. Once the amnesty has ended, there can be no more excuses and the punishment will be severe.”
Revenue officials have widespread powers to trace those with offshore assets. Since July 2005, most states in the European Union have shared information about people who earn savings income in their country but live elsewhere. So if a UK resident has an account in France, the French authorities will share information with the Revenue.
If rental income from your Provence property is going into a French account, the Revenue could catch up with you. Even if it is paid into your UK account, accountants say the Revenue is still likely to trace its origins.
Tax officials have also gained greater powers to probe accounts in offshore havens such as the Channel Islands. Last year the Revenue won a landmark case which gave it the power to force Barclays to hand over the details of thousands of its offshore customers’ accounts. Earlier this year four more banks — Lloyds TSB, Royal Bank of Scotland (which owns NatWest), HSBC and HBOS (which owns Halifax) — were forced to follow suit.
About 3m people have offshore accounts, mainly in the Channel Islands and Isle of Man, and many do not realise they need to declare tax on interest earned overseas.
Richard Mannion at Smith & Williamson, an accountant, said: “It’s a widely believed myth that any income earned offshore is not subject to UK tax. But if you are resident in Britain, in almost all cases you have to pay UK tax on your worldwide income and gains.”
People with offshore accounts will receive letters from their banks in the next few weeks telling them about the amnesty.
Holiday-home owners will not receive letters, though a source close to the industry discussions about the amnesty confirmed that they would be able to take advantage.
David Austin, 41, is one of the thousands of people who earns an income from overseas property. Austin, pictured with wife, Myra, 41, and daughters Camilla, 14, Annabel, 7, and Lucinda, 3, owns a buy-to-let in Sydney, Australia, where he is originally from, as well as a home in Farnham, Surrey.
As the managing director of a property investment company he has a good knowledge of the ins and outs of the UK tax system but he understands why other people struggle. He said: “For a nonprofessional it can be confusing, especially as you are dealing with tax authorities in more than one country.”
People with complicated tax affairs are being urged to seek professional advice urgently because there are concerns that the limited time period will make it difficult for them to comply.
Michael Dawson at BDO Stoy Hayward, an accountant, said: “In cases where people have been saving offshore for a long time and have large sums overseas it could be a nightmare trying to gather together all the necessary information in time.”
Even people who have moved or retired abroad but spend some of the year in Britain are being warned to check that they are not liable for unpaid tax, following a subtle change in the residence rules.
The Revenue states that you are resident if you spend 183 days or more in the UK, or your visits to the country average 91 days or more a year over four years.
Until last year the taxman excluded the days you arrive and leave but following a ruling against Robert Gaines-Cooper, a businessman, these days are now taken into account. A series of tougher questions have been added to the latest tax return to reflect this. David Austin, with wife Myra and daughters Annabel, Camilla and Lucinda, owns a buy-to-let in Australia as well as his home in Surrey, but is confident his tax affairs are in order [/i]
[/b]The government will this week announce an unprecedented amnesty for hundreds of thousands of people with offshore assets, including holiday homes, as it seeks to recover billions of pounds in unpaid tax.
Taxpayers will be given two months to declare unpaid tax on rent from foreign properties, or on cash stashed in accounts in the Channel Islands and other tax havens. Those coming forward will be charged a reduced penalty of 10 per cent compared with 100% in normal circumstances.
Once the amnesty expires in June, Revenue & Customs officials are planning a crack-down on offshore assets using aggressive new powers including sharing information with tax authorities abroad.
The reprieve applies not only to dishonest taxpayers who have wilfully withheld tax, but also to ordinary people who may have innocently underpaid tax because of a simple mistake, or who may not realise they had to declare overseas income. The Revenue estimates that as many as one in five people are not declaring overseas interest.
Related Links
What should you do now?
Property boom moves overseas
The amnesty was expected to apply only to savers with bank accounts in offshore centres such as Jersey, but The Sunday Times has learnt that at the last minute it has been quietly extended to people who own second homes abroad. An estimated 300,000 British people have bought properties overseas, most of them in France and Spain, and about half are thought to earn an income by letting them out for at least part of the year, according to Grant Thornton, an accountant.
Thousands of holiday-home owners now face an anxious few weeks trawling through their records and deciding whether to own up now, or face much higher penalties once the two-month amnesty ends on June 22.
Revenue & Customs has vowed to “track people down” who fail to cooperate, launching a full-scale investigation into their tax affairs that could stretch back up to 20 years. Anyone caught could face prosecution as well as a 100% penalty.
Chas Roy-Chowdhury of the Association of Certified Chartered Accountants said: “The Revenue is sending out a clear message to taxpayers that this is their last chance to own up to undeclared offshore assets. Once the amnesty has ended, there can be no more excuses and the punishment will be severe.”
Revenue officials have widespread powers to trace those with offshore assets. Since July 2005, most states in the European Union have shared information about people who earn savings income in their country but live elsewhere. So if a UK resident has an account in France, the French authorities will share information with the Revenue.
If rental income from your Provence property is going into a French account, the Revenue could catch up with you. Even if it is paid into your UK account, accountants say the Revenue is still likely to trace its origins.
Tax officials have also gained greater powers to probe accounts in offshore havens such as the Channel Islands. Last year the Revenue won a landmark case which gave it the power to force Barclays to hand over the details of thousands of its offshore customers’ accounts. Earlier this year four more banks — Lloyds TSB, Royal Bank of Scotland (which owns NatWest), HSBC and HBOS (which owns Halifax) — were forced to follow suit.
About 3m people have offshore accounts, mainly in the Channel Islands and Isle of Man, and many do not realise they need to declare tax on interest earned overseas.
Richard Mannion at Smith & Williamson, an accountant, said: “It’s a widely believed myth that any income earned offshore is not subject to UK tax. But if you are resident in Britain, in almost all cases you have to pay UK tax on your worldwide income and gains.”
People with offshore accounts will receive letters from their banks in the next few weeks telling them about the amnesty.
Holiday-home owners will not receive letters, though a source close to the industry discussions about the amnesty confirmed that they would be able to take advantage.
David Austin, 41, is one of the thousands of people who earns an income from overseas property. Austin, pictured with wife, Myra, 41, and daughters Camilla, 14, Annabel, 7, and Lucinda, 3, owns a buy-to-let in Sydney, Australia, where he is originally from, as well as a home in Farnham, Surrey.
As the managing director of a property investment company he has a good knowledge of the ins and outs of the UK tax system but he understands why other people struggle. He said: “For a nonprofessional it can be confusing, especially as you are dealing with tax authorities in more than one country.”
People with complicated tax affairs are being urged to seek professional advice urgently because there are concerns that the limited time period will make it difficult for them to comply.
Michael Dawson at BDO Stoy Hayward, an accountant, said: “In cases where people have been saving offshore for a long time and have large sums overseas it could be a nightmare trying to gather together all the necessary information in time.”
Even people who have moved or retired abroad but spend some of the year in Britain are being warned to check that they are not liable for unpaid tax, following a subtle change in the residence rules.
The Revenue states that you are resident if you spend 183 days or more in the UK, or your visits to the country average 91 days or more a year over four years.
Until last year the taxman excluded the days you arrive and leave but following a ruling against Robert Gaines-Cooper, a businessman, these days are now taken into account. A series of tougher questions have been added to the latest tax return to reflect this. David Austin, with wife Myra and daughters Annabel, Camilla and Lucinda, owns a buy-to-let in Australia as well as his home in Surrey, but is confident his tax affairs are in order [/i]
Tax queries
I think the main thing here is that if you have a house in Portugal that you rent out, irrespective of your place of residence then ensure you decllre and pay the tax due in Portugal.
It may be that you should declare elsewhere but at least you are paying the tax due where the income is earned.
It may be that you should declare elsewhere but at least you are paying the tax due where the income is earned.
