HMRC is on the move to grab back taxes to meet their shortfall and its turned its attention to people who may be yet to register their status or who are collecting a foreign income.
The news from tax specialists, Tax Accountant, is that there is still time to put things in order – but you will have to move quickly as HMRC is dramatically ramping up its efforts to contact people. It’s clear that there’s an inkling that the HMRC are actively looking for people – Google search data for August 2022 shows search terms, ‘foreign income’ and ‘foreign tax credit relief’, skyrocketing in the UK.
This frenzy of activity has been kickstarted by HMRC’s investigations into hundreds of UK customers’ accounts with Puerto Rican-based Euro Pacific Bank in late July 2022. As well as Google searches, at Tax Accountant, our clients have been contacting us to find out what exactly is happening.
We’re being contacted by hundreds of our clients who have offshore income or they have recently become UK residents and haven’t yet informed HMRC of their foreign income. It’s clear to see from the influx of calls and emails that they are concerned about their tax status and are concerned to understand how foreign income is taxed in the UK. The majority of these inquiries relate to income from overseas property and crypto assets.
In order to properly answer our clients’ queries, the team at Tax Accountant submitted a Freedom of Information Act request to HMRC. We found that HMRC’s responses were at odds with information that’s previously publicly been issued by HMRC, but we’re urging our clients to declare their income from a foreign source.
How will HMRC get in touch?
Following the first wave of the coronavirus pandemic, HMRC issued 9,008 letters to people as part of the Worldwide Disclosure Facility. Sent out between October 1, 2021, and March 31, 2022, we predict that HMRC could issue a further 18,000 to 20,000 letters in 2022-23. HMRC, it would appear, is seeking to recover £93 million in tax, penalties, and interest through the Worldwide Disclosure Facility.
Taxpayers who do not disclose their other income/s are referred to as ‘moonlighters’ and HMRC are using the Worldwide Disclosure Facility to pull back some of their massive shortfall. While the Worldwide Disclosure Facility will bring in some of the funds needed to plug the gap, HMRC will still have a gap.
With this trend set to continue, it is anticipated that the number of ‘nudge’ letters are sent out with regards to the Worldwide Disclosure will increase. Rather than open a letter from the HMRC with a request for money from foreign income, we’re calling on our clients to disclose their interest at their earliest opportunity.
We are deeply concerned that clients may not have disclosed their foreign income. It might be that they are not sure how to do so or the lack of clarity from HMRC is making it hard to understand if they might fall into this group. It can be hugely unsettling for people who are trying to understand what they need to do, but we’re able to help them understand what needs to be done and when. With HMRC predicted to send out an increasing number of letters out in the coming months, we urge anyone who is in a situation like this to get in touch with our tax specialists.
