It is not Offshore: it's Overseas!

Overseas is offshore. Foreign is offshore. Every country outside the UK is offshore to HMRC.

1. It’s an Offshore Bank Account – It’s not taxable

WRONG.  If you are UK resident and domiciled, you are taxable on your worldwide income even if the bank account is in an offshore jurisdiction.
You have to put the income on your tax return.  HMRC are likely to find out about it through a variety of different international treaties.

2. I am not a director or shareholder of the Offshore Company – There is no UK tax to pay.

WRONG in most cases.

  1. Offshore company may have to make UK tax returns and pay UK tax.
  2. Individuals behind the company can be caught by anti-avoidance rules which tax those individuals on income and gains of the company. This applies even where the individual has not received any benefit from the company.
  3. If the company owns UK residential property, its value will always be within UK Inheritance Tax.

3. It’s an Offshore Trust – why would I be taxed?

Again WRONG in most cases.

  1. You could be taxed because you are the Settlor or Beneficiary of the trust.
  2. The trust could be taxed because it has UK income or certain gains.
  3. The trust may be liable to Inheritance Tax every 10 years.

4. Foreign Tax has already been paid

NOT CORRECT. Usually, it will reduce the UK tax payable but it may not be enough. There may be more UK tax to pay. Also, you should have reported it on your UK tax returns.

Double Tax relief is often available through a Double Tax Treaty but:

  1. Not all countries have a Double Tax Treaty with the UK.
  2. The UK may have the primary taxing rights i.e. UK taxes first and the foreign country gives credit for the UK tax.
  3. The income or gains could be calculated in different ways

5. The project didn’t make any money – There shouldn’t be any tax

BUT THE UK RULES MAY BE DIFFERENT. For example, the UK has very complex rules on what interest can be set against certain income. Many other countries have different rules. The taxable income or gains calculation will usually be different. The foreign country’s loss relief rules are almost certainly different to those in the UK.

 

Bottom Line

If you are UK resident and domiciled, any income or gains you earn or can potentially benefit from are likely to be taxable on you. Even if there is no additional tax, you probably have an obligation to report.

HMRC are almost certain to find out about it. The Common Reporting Standard (“CRS”) applies in over 100 countries. And they have other powers, legislation and treaties available to them

 

Problem?

If you think any of this could give you a problem, seek tax advice.  It is better to go to HMRC before they come to you.

You may receive a letter from HMRC saying that they have information suggesting that you did not include on your return details of overseas assets, income or gains.  It is a standard letter but they have specific information. Again seek tax advice.

 

A Solution

Sandstone Tax can advise and assist you with any taxation needs,  and we would love your custom.  But, most importantly, get advice from somebody who knows about offshore / international taxation. 

If you are in need of tax advice please contact us at
info@sandstone.tax

1623056335103