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Why have I received a ‘nudge letter’ from HMRC regarding my Offshore Investment Funds?

I have recently received a letter from HMRC querying if I am declaring my taxes correctly on my Offshore Income Gains. Why have I received this now, despite not making any changes to my current situation/ UK tax position?

Why have I received a ‘nudge letter’ from HMRC regarding my Offshore Investment Funds?

Many people that have Offshore Fund Investments have recently received ‘nudge letters’ from HMRC, asking to check that they are correctly reporting all of their Offshore Income Gains (OIG) and Excess Reporting Income (ERI).

It is known to HMRC that taxes get underpaid on both Offshore Income Gains and Excess Reporting Income. One way that people do this is rather than declaring as Offshore Income Gains, they declare their gains into Offshore ‘non-reporting’ funds as Capital Gains instead (which has a much lower tax rate).

Why am I receiving a nudge letter now?

In 2017, HMRC introduced the Requirement to Correct (RTC) campaign. This is a statutory obligation for taxpayers that have offshore investments, to correct any issues with their current and past UK tax declarations. They were obligated to do so by 30th September 2018.

The thousands of ‘nudge letters’ that have been sent out recently at the end of February 2020 have been targeted toward those individuals who are suspected of not taking the necessary steps to correct any mistakes/oversights under the Requirement to Correct. If you have received one of these letters, the online system used by the HMRC has flagged you up as having multiple overseas assets, and as someone who may not have assessed their UK tax position thoroughly.

What action should I take?

You should not ignore this nudge letter. It may be a case of a simple oversight, or something that lacks clarity within your multiple jurisdictions on the system. If this is the case, you can simply contact HMRC with a clear explanation to correct this.

However, if this is not the case and you are unsure, or you believe that you do have an issue with undeclared taxes on Offshore Income or Excess Reporting Income, you must seek tax advice from an expert. Not doing this before contacting HMRC could drastically prolong the resolution of your case, therefore creating more confusion. This is also extremely important, as failure under the ‘Requirement to Correct’ campaign means that you will then be under ‘Failure to Correct’ (FTC) legislation. Failure to Correct legislation means that you will be met with multiple penalty charges.

To ensure that you comply with the requirements of any nudge letter that you have received from HMRC, we can help you by introducing you to a UK tax specialist who will be able to provide you with a free introductory consultation that will help clarify your situation. Our specialists can act as your tax agents and work with HMRC on your behalf.

Last updated: 7 April 2020