If you have offshore assets, you must disclose them

As published on the official Gov.org website, if you are a UK tax resident and you hold a bank account or investments in another country, HMRC will automatically receive information about you. This will include details of account balances and any sums paid into accounts (for example, interest and dividends, or from the sale of offshore investments). HMRC has information exchange agreements in place with other countries so it is essential to declare the correct amounts of offshore income and gains on your annual self assessment tax return.

If you receive income or gains from any assets held offshore these must be declared as they arise unless you are a non-UK domiciled individual claiming the remittance basis of assessment. If you have offshore income that you haven’t declared, it’s highly likely you will be contacted by HMRC. In the first instance, this may be in the form of a nudge letter, giving you an opportunity to declare any undisclosed offshore income and to settle any outstanding taxes due. HMRC regularly runs ‘nudge letter’ campaigns that target particular groups of taxpayers. It’s a bit like fishing, to see who might be withholding information and giving them the benefit of doubt before further action.

If matters are concluded voluntarily, and assuming all taxes and interest due are paid in full, penalties are not usually applied. If voluntary action is not taken to pay outstanding taxes or to declare offshore assets, HMRC may open an enquiry and probe further. At this point, you become liable for penalties on unpaid taxes and in extreme cases, may also get a criminal record if found guilty of tax evasion.

HMRC is taking a much tougher stance when it comes to offshore tax evasion, and penalties have steadily become harsher. The criminal record that can follow is potentially more damaging to a taxpayer than the financial implications.  It is always best to make a voluntary disclosure and we can help with advice on how to do deal with HMRC and do this properly.

Sometimes, tax cases come along involving spectacularly large amounts of unpaid taxes and where the taxpayer has evaded tax on offshore assets for years. This is what happened last month, when the billionaire former F1 entrepreneur Bernie Ecclestone admitted he was guilty of tax evasion and accepted an eyewatering £652 million settlement for unpaid taxes, interest and penalties. He also received a 17-month jail sentence, suspended for two years.

His affairs were of course especially complex and involved an investigation that spanned 2 decades. HMRC first started investigating Ecclestone in the 90s, prompted by the transfer of F1 shares to his then wife. These shares were then transferred into an offshore trust, with Ecclestone’s children and his wife named as the beneficiaries. Records show that HMRC reached an agreement over these transactions in 2008 but then in 2014, argued that it had been misled and had been given false information. Another investigation was opened seeking to recoup £1bn.

The outcome of this final case against Ecclestone focused on a conversation between him and HMRC in 2015. During this meeting, he was recorded as being asked directly whether he was linked as a settlor or beneficiary to any other trusts outside the UK. He replied no and this was later found to be untrue. According to the court judge, he was linked to two trust structures and a connected Singapore bank account containing “very substantial” funds at that time.

Unlike most people who fall foul of HMRC because they haven’t declared their offshore (or onshore) income, Ecclestone no doubt still has plenty of money left after paying these liabilities; Forbes magazine estimates the net worth of the Ecclestone family to be $2.9billion. This isn’t unfortunately the case for everyone and not declaring all taxable income is a dangerous and expensive pursuit. If you would like advice about voluntary disclosures, please get in touch via partners@rjp.co.uk.