A New Campaign
A new campaign was launched by HMRC, in September 2022, aimed at overseas entities that may not have met UK tax obligations in relation to the UK property that they own.
HMRC have stated that it has reviewed data, from HM Land Registry in England and Wales and other sources, to identify companies who may need to make disclosures for; non-resident corporate rental income, annual tax on enveloped dwellings (ATED), the transfer of assets abroad (ToAA) legislation, non-resident capital gains tax (NRCGT), and, finally, income tax under the transactions in land rules.
What is Taking Place?
Depending on the circumstances, companies will receive letters, accompanied by a ‘certificate of tax position’, recommending that they ask connected UK-resident individuals to re-examine their personal tax affairs, in the light of relevant anti-avoidance provisions.
Since 2019, ‘certificates of tax position’ have been issued to UK residents who receive offshore income.
The certificates typically require a declaration of the recipients’ offshore tax compliance position within 30 days. HMRC has previously noted that taxpayers are not legally obliged to return the certificate, which could expose them to criminal prosecution, if they make an incorrect declaration.
Standard advice to taxpayers is that they should consider very carefully whether they return the certificate or not, regardless of whether they have irregularities to disclose or not.
One of the letters concerns undisclosed income received by non-resident corporate landlords and liability to ATED, where applicable.
This will also prompt UK-resident individuals who have any interest in the income or capital of a non-resident landlord, whether directly or indirectly, to consider their position as they may fall within the scope of the UK’s ToAA anti-avoidance legislation meaning that the income of the non-resident company can be attributed to them.
The letter recommends that any such individuals should seek professional advice to ensure their affairs are up-to-date.
An alternative letter is being sent to non-resident companies that have made a disposal of UK residential property between 6 April 2015 and 5 April 2019, without filing a non-resident capital gains tax (NRCGT) return.
Disposals of UK residential property by non-resident companies were subject to NRCGT between 6 April 2015 and 5 April 2019. Where the company purchased a property before April 2015 and the whole gain has not been charged to NRCGT, that part of any gain not charged, may be attributable to the participants in the company.
Such corporates may also be liable to pay UK tax on rental profits, as well as income tax under the transactions in land rules and ATED.
The Need for Professional Advice
We strongly recommend that UK-resident individual participants in these companies should seek professional advice, from a firm such as Dixcart UK, to ensure that their matters are up to date.
The Register of Overseas Entities
This new focus coincides with introduction of the new Register of Overseas Entities (ROE), that came into force on 01 August 2022.
As criminal offences may be committed for non-compliance, with the requirement for overseas entities to register certain details (including those of the beneficial owners) to Companies House.
Please see below a Dixcart UK article on this topic: Register of Overseas Entities: A Comprehensive Guide to the new Registration Requirements for Overseas