As published on digitaljournal.com, Tuesday 16 August, 2022.
The U.K. tax inspectorate HMRC is preparing to pull back taxes to meet its shortfall and the government agency has turned its attention to people who may be yet to register their status or who are collecting a foreign income.
This change of circumstances will affect a large number of people. According to the company Tax Accountant, those who wish to put their affairs in order need to begin the planning process.
Internet traffic suggests there is inkling that the HMRC are actively looking for people. For example, Google search data for August 2022 shows search terms, ‘foreign income’ and ‘foreign tax credit relief’, skyrocketing in the U.K.
This level 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.
Trends suggest that many who have offshore income or they have recently become U.K. residents have not yet informed HMRC of their foreign income. The majority of these cases appear to relate to income from overseas property and crypto assets.
In order to assess the situation, the team at Tax Accountant have told Digital Journal they have submitted a Freedom of Information Act request to HMRC. This indicates that HMRC’s responses are at odds with information that has previously publicly been issued by HMRC.
This leads to the general advice that those impacted should declare their income from a foreign source.
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, it is predicted 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.
Aatif Malik, Managing Director and Founder of Tax Accountant, explains: “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.”