‘Affluent’ tax unit to hunt for hidden holiday homes

Thursday, November 10, 2011 | Posted by: Dave Jennings
Categories: Business, Personal, Protecting your wealth | Tags: tax, HMRC, property, income tax, Dave Jennings, tax haven, overseas, offshore assets, income from property, evasion, commercial property, holiday homes, Tax Investigations, avoidance, foreign property ownership, foreign assets, afluent teams, homeowners

Holiday homes and offshore assets won’t be a personal tax haven for long as HM Revenue & Customs (HMRC) continues to crack down on those not paying the correct tax with a new initiative looking into those who own property abroad.

HMRC has announced that it will be using the wide variety of information-gathering techniques available to it to investigate owners of foreign property who have failed to declare any rental income or capital gains for tax purposes, and has drafted in a new 200-strong team of tax inspectors to lead the project.

The new ‘affluent’ teams will focus on those taxpayers with wealth of between £2.5 million and £20 million, and their first task will be to target those who have failed to declare the income they receive from their property overseas.

In contrast to the collaborative service approach used by the High Net Worth teams, who look after those worth more than £20 million, the new affluent teams are concerned purely with compliance and identifying undeclared tax liabilities. To assist them in this, specialist inspectors will also be drawn in from areas such as corporate residence, trusts and estates, and personal residence and domicile issues.

So should taxpayers who own foreign property be concerned with this latest campaign?

HMRC will be rigorously checking through third-party information and comparing this against what has been declared on the owner’s tax returns. HMRC will also consider whether or not its records can justify whether the owner has sufficient means to have purchased the asset.

Any discrepancies will be investigated by HMRC, and even those taxpayers who have complied with their UK tax liabilities may find themselves asked to provide detailed evidence to prove it. It is not only foreign holiday homes, either, as HMRC will also be looking at owners of overseas commercial property, such as land or office space.

Of course, there is nothing wrong with owning foreign property and not all owners receive an income from the property, in fact many let properties make a loss. However, HMRC remains suspicious of all things offshore, possibly with the view that UK taxpayers put money into offshore property, assets and accounts to keep it as far away as possible from the UK tax inspector to evade taxes.

HMRC has stated that this initiative is the first of several that the new affluent teams will undertake, and has indicated that the next group of taxpayers it will look into will be commodities traders.

Following that, HMRC has said that it will turn its attention to those holding offshore bank accounts, an area that has been targeted by HMRC for a number of years through projects such as the Liechtenstein Disclosure Facility, and the recently announced deal with the Swiss tax authorities.

Enquiry letters from HMRC should not be ignored and professional help sought if necessary.

Image: (CC) Arun Katiyar

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