September 30 is a key date for anyone with overseas assets that may be taxable in the UK as HMRC has made it the deadline for disclosure. Disguised remuneration schemes must also be declared by the same day. This month’s deadlines illustrate the importance of good tax advice.
Most taxpayers probably have January 31st circled in red on their calendars or have at the very least made a mental note that this is final deadline for the submission of self-assessment tax returns. Even if all the necessary figures have been compiled and prepared well in advance, the last day of January represents one of the landmark dates of the tax year.
But this year – 2018 – there is another important date that many taxpayers should keep in mind. As HMRC continues its drive to increase the tax take,,anyone with taxable overseas assets or who has taken a loan as a substitute for income to reduce his or her tax bill will be expected to provide details by September 30th.
Under new “Requirement to Correct” legislation, all taxpayers have a duty to inform HMRC about any offshore tax liabilities that relate to income tax, capital gains tax or inheritance tax payable in the UK.
In practice that means that activities such as earning rental income from a house elsewhere in the world, transferring money from an overseas jurisdiction to the UK or renting out a house in Britain while living in a foreign country must now be declared to the tax authorities. The end of September deadline is important because penalties will be imposed on those who don’t declare their overseas assets on or before that date.
HMRC is preparing to step up enforcement activity as soon as the deadline expires. From October 1st, more than 100 countries will begin exchanging financial data on individuals. And once the information has begun to flow across borders, HMRC says its ability to detect non-compliance with tax rules will be greatly enhanced.
And a great many people will fall within the regulatory net. For instance, Britons who have invested in overseas property may be affected. Those with investment income from foreign sources must also inform HMRC. In some cases – as HMRC acknowledges – individuals may not be aware that their overseas assets are subject to UK taxes.
Meanwhile, those who have taken advantage of schemes which enable individuals to (ostensibly) take out loans rather than receiving a salary for the sole purpose of reducing of avoiding tax must also tell the tax authorities.
HMRC is to introduce charges on what it describes as “disguised remuneration schemes” in 2019. However, to soften the blow, the tax authorities are offering a five year installment repayment plan rather than requiring full payment immediately. The good news for High Net Worth individuals is that anyone with an income of more than £50,000 may be given longer to pay. However, to take advantage of this “soft landing” those who think they may be affected must come forward with the necessary figures by September 30th while also agreeing not to take part in any further tax avoidance.
The Bigger Picture
And there is, of course, a bigger picture. The UK Government is continuing to cut debt and borrowing in the wake of the great financial crisis while also maintaining public services. Collecting all the tax that is owed has become a priority and in addition, the authorities are seeking to close down tax avoidance schemes. According to HMRC’s own figures a tighter focus on tax compliance has netted an extra £2.8bn since 2010.
All of which serves to emphasise the importance of good – and regularly updated – tax advice. No one wants to be pay more tax than they strictly have to and there are various ways and means to reduce one’s tax liability while staying well inside the letter and spirit of the law. Indeed as the EIS and SEIS tax reliefs for investors illustrate, Governments have been happy to offer generous tax breaks to encourage socially and economically beneficial behaviours, such as investment in SME businesses with growth potential. A good tax adviser will provide all the necessary information required to invest and manage money tax efficiently.
But tax advice should not be about reducing tax liabilities at all costs by using loopholes in the law. For instance, avoidance schemes – and disguised remuneration via loans would be a case in point – that run counter to the spirit of of what current legislation intends are being systematically closed off. It is vital, therefore that taxpayers pay close attention to changing rules and attitudes.
In the view of The Route – City wealth club, tax planning plays an important role in helping individuals manage their wealth but that does not mean taking an aggressive approach that is likely to fall foul of HMRC at a later date. Tax regulations are changing all the time and most individuals – particular those with a High Net Worth – will benefit from expert advice. That advice should be measured and compliant.
To find out more about The Route – City wealth club’s tax advice services to Members contact the editorial team.
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