An HMRC nudge letter regarding your Spanish assets?. HM Revenue & Customs (HMRC) receives details of taxpayers with overseas income or gains under the Common Reporting Standard, that the UK has entered into along with other jurisdictions.
Under the CRS and EU Directive, financial institutions in participating jurisdictions will report the full name and address, jurisdiction of tax residence, tax identification numbers and financial information of individual clients to their local tax authorities, which will then automatically exchange the data with the tax authorities of the participating countries where the individuals are tax resident.
Spain is one of the over 100 committed jurisdictions working with the HMRC to identify individuals that may have omitted to disclose any potential gain, rental income on a property in Spain or interest paid on an overseas bank account.
HMRC nudge letters
In addition to formal enquiries, UK taxpayers may receive so-called ‘nudge letters’ from HMRC asking them to consider whether their tax affairs are up to date and whether all assets have been correctly disclosed.
The letters are sent in circumstances where HMRC has received information, usually automatically, from other countries that overseas income or assets exist.
This could include those who have Spanish assets, for example, those who live in Spain for some of the year and have bank accounts, property or investments in the country.
A certificate is included with the nudge letter, with three options for an individual to fill out. However, it is not a legal requirement that you complete the certificate and the letter is not a mandate, hence the term ‘nudge’. It is intended as a reminder that failure to properly account for overseas income or gains could expose you to civil penalties or even criminal liability.
Responding to a nudge letter
The three options in the certificate are:
- Confirmation that there is no tax to pay;
- Confirmation that you have declared the overseas income and gains on your tax return;
- A statement that your liability is covered by personal allowances and tax relief.
If you know that your tax affairs are not up to date, you can state this and agree to make a disclosure to HMRC’s Worldwide Disclosure Facility.
Am I under investigation if I receive a nudge letter?
Receiving a nudge letter does not mean that you are under investigation by HMRC. They are issued without any check of the information upon which they are based and are simply intended to persuade the individual to review their tax affairs to ensure all is in order.
However, it is important to take care before signing any certificate as an error could be used against you in proceedings by HMRC. You could face civil penalties or, where HMRC holds that dishonesty has been involved and a false statement made on the certificate, they have the option to bring criminal proceedings.
Worldwide Disclosure Facility
If you believe that your tax affairs might not be up to date, it is recommended that you seek expert advice on how to remedy the situation.
You can make a report to HMRC’s Worldwide Disclosure Facility, however, this does not offer any indemnity against prosecution.
Once you have notified HMRC of your intention to make a disclosure you will have 90 days to prepare the disclosure and calculate the amount of additional tax due. You will also be required to self-assess what has happened and this assessment may be used when penalties are calculated.
The value of all overseas assets held outside of the UK over the previous five years will need to be disclosed, to include cash, property, investments and valuable items.
Payment of the tax should be made at the same time of the submission unless you are asking for a ‘Time to Pay’ agreement.
Professional advice
An HRMC nudge letter can be daunting with its emphasis on penalties for errors and omissions. It is advisable to speak to an overseas tax expert to ensure that you have complied with the rules.
At Del Canto Chambers we specialise in international tax, and we can advise you of your liabilities and ensure that you have properly disclosed your income, assets and gains. We can also represent you if you have been notified of an investigation into your affairs or a legal case is being brought against you.
Del Canto Chambers is a leading London Chambers specialising in tax, international tax and legal affairs, property law, intellectual property and legal advocacy.
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