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HMRC asking information from occupiers of offshore-owned UK properties

14 August 2019

We are now seeing letters from HMRC to occupiers of UK properties which HMRC believes are legally owned by overseas companies.

The purpose of the letters is ostensibly to verify whether any appropriate UK income tax has been deducted at source.  HMRC states: “You may need to take tax from your rent.  We want to make sure you take off the right amount of tax and pay this to us.  We also want to help you to understand how to do this... To help you take off the right amount of tax from the rent you pay, we need some information about the property you live in...”

What information is HMRC requesting?

The information requested by HMRC is wide-ranging - the letters include forms which HMRC asks the occupier of the property to complete, detailing:

  • The full name and any previous names of the occupier, their National Insurance and UTR number, their date of birth, contact details and UK residence status
  • The date they moved into the property
  • Whether they pay rent and, if not, why not
  • The party to whom the rent is paid
  • Any connection with the owner
  • Whether the property is owned by a trust – if so, the name of the trust, the trustees, settlors and beneficiaries, when and how the trust acquired the property. HMRC requests a copy of the trust deed, if available.

Hence, what is ostensibly a letter about whether income tax should have been deducted by tenants of properties held by overseas landlords has in fact much broader potential implications relating to matters such as the Annual Tax on Enveloped Dwellings (ATED), any possible occupation benefits from trusts, and any possible inheritance tax arising from the settlement of trusts.

Should clients complete and return the forms to HMRC?

The letters are being sent to individuals who are not under enquiry and do not of themselves open enquiries into them. Furthermore, the letters do not constitute information notices issued under HMRC’s information powers. Accordingly, HMRC is asking the occupiers to provide voluntary assistance.

In the event that the occupiers do not respond, HMRC has a wide range of investigatory powers, including opening enquiries into the tax affairs of the occupier/suspected beneficial owner, and pursuing information through information notices, if necessary. However, completion of the forms may also lead to further questions from HMRC, and the possibility of HMRC opening formal enquiries.

Recipients of the letters and their advisers should carefully review their position to confirm whether they are fully tax compliant in all areas where the information sought by HMRC has a bearing. They should then seek specialist advice on how best to respond to HMRC and address any irregularities or areas of tax uncertainty with HMRC.

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