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Offshore property owners in HMRC sights

Offshore property owners in HMRC sights

HMRC will launch a new campaign in September targeting non-compliance by non-UK resident companies owning UK residential property.

HMRC has extensive information at its disposal including the Land Registry enabling it to identify non-resident corporate owners of UK property that may not have met their UK tax obligations.

HMRC will issue one of two letters:

  1. The first will be issued to non-UK resident companies that own UK property and which may need to disclose rental income if the property is let, or, if the property not let, pay the Annual Tax on Enveloped Dwellings (“ATED”).
  • The second will be issued to non-UK resident companies that records indicate have disposed of UK residential property between 6 April 2015 and 5 April 2019, but which have not filed a non-resident capital gains tax return.

The letters in this latest campaign will be addressed to the corporate owner, but they will recommend that any connected UK tax resident individuals review their personal circumstances to ensure that their tax affairs are also up to date. Such connected individuals might include UK resident trust beneficiaries occupying a property owned by the trustees through a non-resident company or UK resident shareholders of companies that have disposed of properties.

The issue of so-called “nudge letters” has become a favourite compliance tool for HMRC. They enable HMRC to target large numbers of taxpayers in a single campaign by shifting the burden of undertaking compliance checks from HMRC to the taxpayer, requesting that the taxpayer checks his or her affairs and, if required, makes a disclosure of any unpaid liabilities.

While the letters will be accompanied by “certificates of tax position”, there is no statutory obligation to complete and return these and generally we advise against signing such certificates. However, we strongly recommend that recipients review their positions carefully to consider whether they need to amend their returns or make a disclosure to HMRC.

The letters are a timely reminder that the taxation of structures holding UK real estate is complex and has changed significantly over the last decade and that there are implications not only for the direct owners of properties but for trust beneficiaries and others with indirect interests.

If you or your clients would like to discuss please contact us.