Increase in information available to HMRC
The availability of information to HMRC from different sources – from leaked bank data to that arising from Tax Information Exchange Agreements with authorities across the globe – has increased substantially over the years. This has resulted in HMRC having yet more ways of obtaining information regarding UK resident taxpayers who hold interests in overseas assets including offshore trusts, bank accounts, companies and structures.
The HMRC Offshore Co-ordination Unit has been using this information to contact UK taxpayers and the first tranche of letters was issued in September 2011, using details of the overseas HSBC accounts that were so well publicised at the time.
The letters were written in the form of a questionnaire, providing the recipient with three options in response to the information gathered in relation to overseas assets. The three options are:
A. Declaration that there is no additional tax to pay; or
B. Confirmation that the taxpayer has made or will be making a disclosure under a UK disclosure facility; or
C. Confirmation that the taxpayer will be making a disclosure outside one of the UK disclosure facilities.
Since 2011, the flow of tax information through international tax authorities has increased and we believe it is highly likely that another tranche of these ‘ABC’ letters will be issued by HMRC to UK taxpayers.
Should a client receive such a letter, it is important to ensure that you know exactly what HMRC are contacting your client about and if the information they have obtained is correct. The implications in stating one of the above options and returning the form are significant, as a false statement will carry the same threat of prosecution as other declarations of this nature.
- Identify the offshore entity which is the subject of the letter
- Ensure that the information held by HMRC is correct and up to date – has the structure ceased to exist, has the account closed etc?
- Discuss with your client their involvement with the named entity and whether there are further potential tax implications resulting from this
- Ensure that any connected entities are identified and disclosed to HMRC
- Contact the OCU to discuss the letter if you believe the information held by HMRC to be incorrect
- Ignore the letter – Once your client has been identified and contacted, a response must be provided
- Respond without knowledge of the full facts relating to your client’s interest in the named entity
- Allow the client to respond without making clear the implications resulting from each response
- Respond with a ‘B’ or ‘C’ answer and fail to follow this up with the client to ensure that a disclosure has been made
Gabelle has considerable experience in dealing with HMRC correspondence of this nature and managing the follow-up response from HMRC.