October 8th, 2020 / Insight posted in Articles

HMRC on the tax trail of Britons with assets in India

Our tax dispute resolution team has recently been contacted by individuals who have received letters from HMRC about their Indian bank accounts.

India signed up to the automatic exchange of information in 2015 and started to share information with the UK in 2018. The Common Reporting Standard was devised by the Organisation for Economic Cooperation and Development to ensure that participating countries exchanged information at the same time and in the same format to crack down on tax avoidance and evasion.

The letters from HMRC are commonly called ‘nudge’ letters, as the idea is to prompt the individual to review their UK tax position to see if the income or gains arising on the investment of the overseas funds should have been reported to HMRC.

Before issuing the letter, HMRC undertakes a risk assessment on the information it holds to determine what type of intervention is required. Where it is unclear whether any tax has been lost, HMRC issues a nudge letter informing the recipient that it has received information through the exchange of information. The recipient is asked to review their tax affairs and, if necessary, use the worldwide disclosure facility (WDF) to disclose any unpaid tax.

In addition, some recipients have been asked to complete a certificate confirming that they either need to disclose undeclared income and capital gains or that they consider their affairs to be up to date. This should be considered very carefully.

It is advisable for the individual to seek specialist tax advice before signing. Often, the best approach is for the adviser to write to HMRC to acknowledge receipt of the letter and explain what action, if any, will be taken to resolve the matter. Getting the strategy right first time is key to minimising exposure.

Getting expert advice

Anyone receiving a nudge letter should contact their tax adviser straightaway. Moore Kingston Smith specialises in assisting with complex tax affairs, specifically those involving overseas assets. We can advise on whether the overseas income is subject to tax in the UK.

Our tax dispute resolution experts have vast knowledge of how to resolve disputes and make voluntary disclosures to HMRC. We have a deep understanding of the tax legislation and how HMRC works, enabling us to recommend the right strategy to resolve the enquiry in the most cost-effective way.

For further information or any queries, please contact John Hood.