During November 2022, HMRC will start a new campaign to encourage offshore corporates owning UK property to check their UK tax positions and, if necessary, come forward to disclose undeclared tax.
HMRC has access to considerable volumes of data, including Land Registry information linking companies and other entities to UK properties. From this, they identified non-resident corporate owners of UK property who appear not to have met their UK tax obligations. HMRC intends to write to these corporates suggesting that they check and rectify any mistakes in their tax filings, as well as recommending that they should ask connected UK-resident individuals to also ensure their personal tax positions are up to date.
As well as direct ownership by corporates, many UK properties are held in offshore structures that also contain a trust or trusts, and there may be beneficiaries and/or controlling directors who have a direct or indirect interest in the property. This raises a wide range of potential UK tax issues, so there are two separate versions of these ‘nudge’ letters that HMRC will be sending to corporates. Between them, the letters cover suspected errors relating to Annual Tax on Enveloped Dwellings (ATED), UK rental profits, income tax arising because of transactions in land rules, and non-resident capital gains tax (NRCGT). The latter may apply to gains on the disposal of UK properties between 6 April 2015 and 5 April 2019.
For UK-resident individuals connected to the corporates, the issues which could result in a UK tax liability include:
- Gains attributed to them as participators in the company
- Tax on benefits such as the occupation of a property or other transfers of assets abroad.
Depending on the reasons why the correct tax was not declared and paid when it was due, HMRC has up to 20 years in which to assess additional tax. Tax-geared penalties and late payment interest may be due too.
Nothing to declare?
If a corporate considers it has no additional liability to UK tax, then advice should be sought on how best to respond to HMRC, but the letters should not be ignored. If HMRC receives no reply, it may start an investigation, particularly after it reviews the corporates’ new entries on the Register of Overseas Entities owning UK property at Companies House. Any corporate or trust uncertain of their position should consider obtaining a second opinion on their position.
Help to put things right
If a corporate or any part of the structure considers it has additional tax to pay, specialist advice should be sought on how best to approach HMRC to make a disclosure, given their specific circumstances. HMRC’s Worldwide Disclosure Facility (WDF) may be appropriate, but in situations involving deliberate mistakes, the Contractual Disclosure Facility (COP9) may be more appropriate.
For help and advice, please get in touch with Claire McGuigan or Karen Doherty.