HMRC writes to UK residents named in Pandora Papers
In 2021, the International Consortium of Investigative Journalists (ICIJ) obtained access to the Pandora Papers. The information came from 14 offshore service providers (law firms, corporate service providers and wealth managers) and extended to almost 12 million documents. HMRC has announced that it has started to write to the UK residents named in the papers to encourage them to check that their tax affairs are up to date. This follows the success of the earlier ‘nudge’ letters to UK taxpayers, which encourage the recipient to review their tax affairs and, where necessary, make a voluntary disclosure to HMRC.
Who is affected?
These letters are reserved for cases where HMRC has information but is unsure as to whether tax has been lost. Rather than undertake a lengthy and costly investigation, the taxpayer is prompted to check their affairs are up to date and speak with their tax advisers.
What information does HMRC hold?
HMRC hasn’t stated exactly what information it holds, only that when the Pandora Papers were released it started to review the data to identify the beneficial owners (the people who ultimately own or control the overseas entities). It is likely that the ICIJ has granted tax authorities full access to the information in order to investigate people with interests in overseas entities that have not been reported for tax purposes.
How does this affect me?
Most UK residents with assets overseas have sought tax advice to ensure that they are compliant from a UK perspective. Unfortunately, the advice can easily become out of date due to changes in the complex anti-avoidance legislation that applies to assets held outside the UK.
Anyone receiving a letter from HMRC should take the opportunity to check with their advisers that everything is in order and up to date. HMRC will most likely follow up the letter with an investigation if it doesn’t receive a response. It is important to minimise the risk of an enquiry and the associated costs of answering HMRC’s questions, which could go back up to 20 years.
If you think that your tax affairs are not up to date and have not yet received a nudge letter, it would be sensible to seek advice now to make an informed decision as to how you can minimise your exposure. By approaching HMRC first and making a disclosure using the Worldwide Disclosure Facility, you will be able to minimise your exposure to tax-geared penalties. In the most serious cases, you may wish to take advantage of the Contractual Disclosure Facility that applies where there has been a deliberate attempt to evade tax.
How we can help
Moore Kingston Smith specialise in tax dispute resolution and has a proven track record in assisting clients with assets overseas to regularise the past. If you would like to discuss how this announcement might affect you, please do not hesitate to contact John Hood on 020 4582 1440 or jhood@mks.co.uk.