Time for a tax health check-up

Requirement to correct (RTC) in relation to offshore assets

If you have offshore assets, such as overseas bank accounts or investments (such as shares) or property, which generate income or profits from sale you need to review your tax position in terms of them.

We have seen it numerous times where individuals adopt the view that offshore assets do not require disclosure to the UK taxman. This is not usually the case as normally an individual liable to tax in the UK has to disclose all income and gains relating to assets wherever they are in the world.

H M Revenue and Customs have recently introduced new legislation which dramatically increases penalties in relation to undeclared income and gains up to 200% of the undeclared tax which arises. In fact, the penalties can be higher where undeclared tax exceeds £25,000.

If you think you may have an offshore tax related issue it is important to seek professional advice urgently as the legislation gives a deadline of 30 September 2018 by which to notify disclosure. Quote to be used within the template.

We have seen recent cases where H M Revenue and Customs have contacted individuals as they believe that undeclared offshore tax liabilities exist. This is due to the fact that many overseas tax authorities are continuing to exchange extensive information with H M Revenue and Customs about ownership of assets.

Buy-to-let tax

Since April 2016, wear and tear allowance was abolished for fully furnished buy-to-lets. It is important that landlords review the costs incurred in relation to replacement furnishings and check that they are obtaining tax relief.

Changes were also introduced to restrict tax relief on loan interest. From April 2017, tax relief on interest was restricted so that by 2020 interest will no longer be an allowable expense but will instead attract relief at 20% as a reduction to your tax bill.

The changes will have a major impact on certain owners of buy-to-let property. Therefore, advice will be required to assess the tax impact in order for tax planning opportunities to be explored.

Also, if you have a company which owns a residential property classed as a “dwelling”, then be aware that the Annual Tax on Enveloped Dwellings (ATED) charge could apply, and a return may need to be filed if the property is worth more than £500,000. The annual charge starts at £3,500 and increases depending on the property’s value. There are certain events which can trigger an urgent ATED return and so if in any doubt please contact us.

And finally – Making Tax Digital (MTD)

Whilst MTD is not coming in until 2020 at the earliest for direct tax, from April 2019, all businesses with a turnover that exceeds the VAT threshold (£85,000) will have to keep digital records and submit their VAT returns only using digital systems that are compatible with MTD.

Despite it being only 9 months away, there seems to be an alarming amount of businesses who either have not heard of MTD or have little knowledge of it.

For further information and guidance, please contact Jon Miles or Deborah Sawyer.