THE UK Revenue and Customs announced an unprecedented amnesty for hundreds of thousands of British tax residents with assets offshore, including holiday homes, property companies and bank accounts, in an attempt to recover billions of pounds in unpaid tax.
Taxpayers will be given two months to declare unpaid tax on rent from foreign properties, or on interest from accounts in the Channel Islands and other tax havens.
Those coming forward will be charged a reduced penalty of 10 per cent compared with 100 per cent in normal circumstances. The reprieve applies not only to tax dodgers, but also to ordinary taxpayers who may have mistakenly under declared, or who ingenuously may not realise they had to report overseas income.
Offshore bank account
Once the amnesty expires on June 22, the UK Revenue is planning to crackdown on undeclared offshore assets. Tax officials have gained greater powers to probe accounts in offshore havens such as the Channel Islands and the Isle of Man.
Last year the Revenue won a landmark case which gave it the power to force Barclays to hand over the details of thousands of its offshore customers’ accounts. Earlier this year, four more banks – Lloyds TSB, Royal Bank of Scotland (which owns NatWest), HSBC and HBOS (which owns Halifax) – were forced to follow suit.
This amnesty should, at the very least, serve as a wake-up call to everyone to make sure their tax compliance affairs are in order.
An estimated 3,000,000 people have offshore accounts. Not all realise they need to declare tax on interest earned overseas. People with offshore accounts should receive letters from their banks in the next few weeks telling them about the amnesty.
UK officials threaten to pursue those who fail to co-operate, via the aggressive sharing of information with tax authorities abroad and launching full-scale investigations, which could stretch back up to 20 years. Anyone caught could face prosecution as well as a 100 per cent penalty. The Revenue is sending out a clear message to taxpayers that this is their last chance to co-operate.
Consequences promise to be severe for those failing to own up to undeclared offshore assets once the amnesty comes to an end on June 22.
Rental income abroad
Many British have bought property in Portugal: some as holiday homes, others for retirement while still others as a buy-to-let investment. Whatever the motive, those who are still tax resident in the UK must follow certain crucial compliance steps: a) they are required to have a) Fiscal Representative in Portugal; b) they must report any rental income to the Portuguese and settle with Finanças; and c) a self-assessment is due in the UK, reporting the letting income as well as the international tax credits and deductions for necessary expenses.
UK EXPATRIATES, who are tax resident in Portugal, will be unaffected by the Amnesty and subsequent crackdown, since they are now taxable on a worldwide basis in Portugal, not the UK.
These compliant individuals only pay British tax on income arising specifically within the UK, such as rent from UK property. However, there are still many who have been lethargic in assuming their tax responsibilities in Portugal and who have continued to be seen as UK resident taxpayers, despite the fact that they now reside in Portugal and only return to the Great Britain for occasional visits.
It is somewhat ironic that those paying tribute to the wrong taxman are being caught in the web, not of the Portuguese, to whom they lawfully owe the tax but of greedy Gordon Brown, who wants even more of what he isn’t entitled to in the first place!
What to do
If you live in Portugal for more than six months of the year, then it is now imperative that you become a regis