HMRC to launch tax collection campaign for offshore property owners

HMRC is targeting the owners of offshore companies that hold UK property. Using the legal gateways, HMRC can access the Land Registry and ask non-resident landlords whether their tax affairs are current or if they should disclose UK tax obligations and liabilities.

The campaign is set to focus on any potentially complex tax issues that may arise for non-UK corporate entities that own UK properties.

What will HMRC do?

HMRC is expected to take two separate approaches:

• As a first step, HMRC will target non-resident company landlords and shareholders who may not have disclosed UK rental income. Under anti-avoidance legislation, HMRC will examine the tax compliance status of the overseas entity and whether UK shareholders are required to disclose income earned abroad.
• HMRC will also focus on historic non-resident disposals of UK residential property. Capital gains tax has been applied to UK residential property gains since 2015. HMRC are concerned about historical non-compliance with chargeable gains and income.

Additionally, HMRC may require overseas entities to verify that they are tax compliant. Consider providing or completing a Certificate of Tax Position, a formal declaration that the letter’s recipient is tax compliant.

What should you do?

If you have received a letter from HMRC, the first thing to remember if there is no statutory requirement to complete a Certificate of Tax Position or Intention to Disclose. However, providing this may help your case.

You should also not ignore the letters, as HMRC may open its own investigations to confirm you are tax compliant. If HMRC receives any information from the Register of Overseas Entities submissions, it may choose to investigate further.

Should you need to disclose any information, you should proceed carefully. Respond to any correspondence within 40 days for full control over the process and to avoid any further investigations.

How can Moore Kingston Smith help?

Overseas entities receiving one of these letters should consider their position carefully before signing the Certificate of Tax Position. If HMRC establishes that the certificate is incorrect, in the worst-case scenario, this can result in a criminal investigation. The better approach would be to seek expert advice and for the tax adviser to respond on behalf of the recipient.

We specialise in assisting clients in reviewing their tax position and how to regularise any non-compliance. We know how important it is to minimise the impact of these letters and can provide peace of mind when dealing with HMRC.

Regarding regularising past and historical issues, we have significant experience in the disclosure routes available and how to help our clients successfully minimise their exposure.

If you have received one of these letters or expect to or would like any advice on the matter, contact Melanie Reed or John Hood.