UK individuals with properties abroad are to be targeted by HMRC.
HMRC announced on 31 October that its ‘affluent team’ (set up by HMRC in September 2011 to target wealthy individuals) is focusing on people with holiday homes overseas and is using data mining tools to identify UK residents with potential tax liabilities.
The purpose of the exercise is threefold:
- to uncover undeclared rental income;
- to ensure gains made on the disposal of overseas assets have been disclosed; and
- to verify how the owners funded the purchase of the property and continue to fund the running costs and loans linked to the property.
Advisers should be aware that even if rental income has been declared, HMRC may still wish to check how the purchase of the property was financed to ensure that the monies came from taxed income/gains or a non-taxable source. Alternatively, if the property has been sold then HMRC will wish to check the gain was declared properly.
This is, of course, one of many proactive campaigns now being initiated by HMRC to tackle tax evasion and one of the purposes of these campaigns is to ‘encourage’ taxpayers to come forward voluntarily. Many of our clients are taking advantage of opportunities such as the Liechtenstein Disclosure Facility to make a voluntary disclosure to HMRC.