Does a loan/salary advance needs reporting on Real Time Information (RTI) system of HMRC?
Short answer, no.
Source:
Tag: HMRC
HMRC Worldwide Disclosure Facility (WDF)- India
What to do when you get a nudge letter from HMRC regarding your overseas assets, income or gains.
Do I need to make a worldwide disclosure?
If you receive a nudge letter (which starts as `Your overseas assets, income or gains`) from HMRC and after having checked your tax affairs you find that you need to make a WDF disclosure, you can follow this step by step guide.
`Prevention is better than cure` – It is wise not to wait for HMRC to find out about your worldwide income and send you a `nudge` letter. If you realise that you have undeclared foreign income or gains, immediately contact your tax adviser. Voluntary disclosures attract lower penalty rates.
Step 1 – Where possible, contact HMRC on the telephone number given on the nudge letter. They will give you more information about the foreign income in question, which will help focus the review of tax affairs and help in filing an accurate disclosure.
Step 2 – Send the certificate back to HMRC after ticking box 1.
Please note this is an important step because if the statement turns out to be false this could expose the tax payer; example by increasing disclosure years from 12 years to 20 years.
What actions do I need to take after sending the worldwide disclosure certificate back to HMRC ?
Step 3 – Register for the Digital Disclosure Service (DDS) on Worldwide disclosure webpage of gov.uk.
Please note 90 day time period starts from the date you notify HMRC using DDS not from the date you sent the certificate back mentioned in Step 2.
Step 4 – You have now 90 days to:
- Gather all information to complete the disclosure.
- Calculate the total tax bill including tax, duty, interest and penalties on a year by year basis.
- Fill in the disclosure, using the unique disclosure reference number (DRN) given on WDF notification.
- Gather information on maximum value of overseas assets you had in the last 5 years.
IMPORTANT: Worldwide disclosure should be full and frank .
What help is available to calculate income and gains ?
I have written a number of blogs on this topic, which you may find useful.
- WDF – Taxation of Interest Income from NRE / FCNR Deposits.
- WDF : Taxation of LIC Policy in UK.
- WDF : Foreign gains via non-resident company
- WDF : Foreign capital losses
- WDF : TDS on NRO Deposits in India
- WDF : Indian provident fund and UK taxation
- WDF : Indian Mutual funds and UK taxation
- WDF : Computation of Double taxation relief
- WDF: Compulsory land purchase in India
- WDF: Foreign income less than £2k
- WDF : Foreign agriculture income
- WDF : Foreign partnership income
- HMRC has launched a toolkit for foreign income on 6th December 2022. I have read through it, it’s fairly comprehensive. A simple video on Youtube also jogs client’s memories.
- Be aware of the effect of Double Taxation Agreements for this DTAA Digest and HS 263 will come handy.
How many years are covered by worldwide disclosure ?
Taxpayer will also need to self-assess their own behaviour. Based on this assessment, tax payer will be presented with the number of years for which disclosure needs to be made.
| 12 years | Non-deliberate (see below) |
| up to 20 | Dishonest behaviour |
Time period for offshore assessments was changed in 2019. This overrides RTC Regulations. Earliest year, if reasonable care taken, is 2015/16. If behaviour was careless earliest year is 2013/14. Incase of failure to notify last 20 years need to be included. These time periods changed on 6th April 2021.
This will also have an effect on the quantum of penalty.
What penalties are charged under worldwide disclosure regime?
Details of penalty calculation is given in HMRC guidance CC/FS17
India is not on the list thus falls in the residual category 2.
See Example of Offshore Penalty Calculation
Is there scope of Penalty suspension?
Penalty suspension – Penalty for the year 2016-17 and later years can be requested to be suspended (in case of inaccurate tax returns ) refer to David Testa v Revenue & Customs [2013] on the BAILII Website. BAILII is a small charity making case law freely available.
HMRC’s WDF team can consider penalty suspension in case of full co-operation is provided to HMRC.
When does the tax bill needs to be paid?
You must make full payment in accordance with the disclosure on the same date that the disclosure is submitted, unless a payment plan is needed.
Current rate of interest for late payment of tax is 6.75% since 13th April 2023 [this set at Bank of England base rate plus 2.5%] – source
Please note in case of Time to pay arrangements. Interest on penalties usually start 30 days after the issue of Notice of determination by officer of HMRC. For example a penalty is decided for the year ended April 2015 on 31st March 2023. Interest on penalty will start from 30th April 2023 see TMA 1970 Sec 103A
You will get an acknowledgement from HMRC within 15 days of them getting the completed disclosure. They will aim to tell us of the intended course of action within 90 days of the acknowledgement.
Which exchange rate to be used ?
HMRC has provided helpful guidance on RDRM31190.
As per HMRC guidance, if threshold is breached and you need to include the income in the tax return, exchange rate that needs to be used is of the day that the income arose overseas. In practice it may not be reasonable to calculate in this way, in those cases average rates can be used. See foreign notes SA106.
Do I need an accountant?
Worldwide disclosure involves looking at different income/gains over a number of years. Tax rules are complex and handling HMRC enquiry can be a stressful experience. It is advisable to engage a qualified accountant. I have listed a few reasons for hiring a qualified accountant in our blog – Do i need an accountant ?
Further resources to help you on your worldwide journey:
HMRC Guidance on worldwide disclosure facility
ICAEW page for current and historic exchange rates
Employee Benefit – life insurance policies for employees
Group life insurance is a common benefit provided by employers, this blog explains its tax implications.
Group life policies are often purchased by employers see IPTM1125
Employees
Group life policies which insure individuals up to the age of 75 and only provide death benefits for the dependants of that person will not give rise to income tax charges see IPTM7020
For Full guidance see IPTM 7015 to IPTM 7060
A contribution paid by an employer in respect of their employee scheme is not taxable as earnings for the employee concerned; see PTM031100
Employers
Tax relief on employer contributions is given by allowing contributions to be deducted as an expense in computing the profits of a trade and so reducing the amount of an employer’s taxable profit ;
see PTM043100 and see BIM45525
Tax relief can only be given on contributions that have actually been paid. The amount shown in the profit and loss account in respect of the obligations of defined benefit schemes may be substantially different from the amount of contributions paid to the scheme, but it is only the amount actually paid that can be considered for tax relief. see PTM043200
Contributions in respect of members who are directors who are shareholders or connected to a controlling director
Broadly, the employer’s contribution will be wholly and exclusively for the purposes of the trade if the contribution paid in respect of a controlling director or a connected employee is in line with a contribution that would have been made for an unconnected employee in a similar situation.
Case law – Beauty Consultants Ltd v Inspector of Taxes [2002] SpC 321 see BIM45530
General guidance on employer’s contributions in the Business Income Manual at BIM46000.
Private residence relief in case of inherited property
PPR Relief on inherited property
In a recent case an individual died, say in 2016. His home was inherited by his two daughters Alice and Beatrice. In 2018, Alice moved in the house and started living there as her main residence.
In 2020 Alice bought the share of Beatrice to own the house fully. House was finally sold in 2022.
Question 1. Since which date will Alice get the private residence relief.
Answer: Alice will get the relief from 2018 when she moved in the house’ see Hector and Miss Kitka example on Tax café website. see also HS283 – section `Who qualifies for relief ` it states You’re also entitled to relief if you jointly own the freehold or lease with someone else.
Question 2. What will be the period of ownership for Alice.
Answer: It will be 2016. As under s222(7) TCGA92, where different interests are held at different times the period of ownership begins at the date of the first acquisition on which expenditure is incurred which would have been deductible in computing any gain. see CG64930
Foreign gains via non-resident company
Foreign Gains accruing to non-resident companies whose shares are owned by UK tax residents may be taxable in the UK.
Background
Usually, a company not resident in the UK is not normally liable to UK tax nor its shareholders.
Thus, UK residents could avoid tax by holding assets overseas via a foreign company.
Rule
Since 27 November 1995, foreign gains accruing to non-resident companies whose shares are owned by UK tax residents are attributed to the UK tax resident and taxable in the percentage of shares held by them in that foreign company.
Note, NO gain is taxed in case percentage of shares held is less than 25% on and after 06/04/2012.
Example
Mr A opens a company in India and buys a house. After few years company sells the house. Indian company will pay taxes on the gain in India and Mr A will also be liable to pay taxes on the gain in UK.
Foreign tax relief is available. DTAA may also be applicable.
Losses
Foreign losses accruing to non-resident companies are NOT attributable to UK tax resident. However, current year losses are allowable to get a net gain figure.
Reliefs
Two main reliefs:
- Assets used for a trade; or
- Where tax avoidance was not the main purpose
Source:
HMRC CGT Manual CGT57200P onwards
TCGA Section 3 onwards
Acknowledgement:
- Para 49.7 in Tolley’s Capital Gains Tax Main Annual
- Bloomsbury Capital Gains Tax
- For further reading, visit our Worldwide Disclosure blog.
Roy Accountants 