Exchange of information and voluntary disclosure
We are now at the start of an era where unprecedented levels of information will be supplied to HMRC in respect of UK residents who have overseas income. This will have a major impact on UK tax resident non domiciled individuals.
Originally agreed in 2014 between 47 countries, the Common Reporting Standard (CRS) is a global initiative launched by the OECD, designed to prevent tax evasion using Automatic Exchange of Information Agreements between countries’ tax authorities.
From 2016, 58 counties have signed up to automatically exchange information about assets and income to other relevant authorities such as HMRC and from 2017 a further 35 countries have joined the club.
Now (in 2021), over 100 countries have signed up to the use of CRS for sharing information, including all countries in the European Union, United Kingdom, China, India, Hong Kong, Russia. As the United States has already implemented their own version with FATCA and offer reciprocal access, they are not officially signed up to these initiatives.
The CRB and the Automatic Exchange of Information applies to any person with financial accounts or responsibilities outside of their country of tax residence. In particular, this will impact on: -
As part of CRS and the Automatic Exchange of Information Agreements the following information will be exchanged automatically:
A small selection of financial accounts is excluded, although this will vary depending on each jurisdiction. For example, in the UK, Premium Bonds are excluded.
When HMRC receive the information, they are likely to put the onus on the taxpayer by asking them to conform that they have declared all the relevant information on their tax returns and that their UK affairs are in order both currently and historically. They will then decide what action to take based on the amount of risk they assess to the reply. In some cases, an investigation with be started immediately. If this is the case, you need to be prepared to respond.
Some common area’s they have looked at to date include: -
Ultimately, if you have accounts with financial institutions outside your country of residence, you must ensure that your tax affairs are in order, correct and all correct taxes declared in all relevant jurisdictions. Currently there are arrangements in place where a voluntary disclosure can be made to HMRC and favourable terms will be applied to the settlement, if you do not act and HMRC obtain this information you would face more severe penalties and maybe even prosecution.
The following action should be considered:
Why make a voluntary disclosure?
The penalties for failure to correct your prior year tax position are much higher if HMRC have to prompt you for disclosure in comparison to a voluntary disclosure.
By making a voluntary disclosure, you will not be prosecuted for criminal tax evasion. The amount of penalties will be substantially reduced, and HMRC will limit the investigation to the last 7 years. Although, you will still have to pay tax, penalties, and interest, but with substantial reductions.
If you feel you may have an issue relating to this matter or you would just like us to go over your affairs in detail to obtain peace of mind, please do not hesitate to contact us and we can then prepare a personal detailed action plan.
Services we offer
We are pleased to able to offer the following taxation-based services: -
All taxation services are arranged on a fixed fee basis with the fee to be charged agreed in advance of any work being undertaken.
For all questions regarding your business in the UK and tax planning, please contact our Business Consultancy team at Law Firm Limited on +44 (0)20 7907 1460 or via email