HMRC to target offshore corporates owning UK property

HMRC informed the Chartered Institute of Taxation (CIOT) that it would be launching a new campaign in September to tackle non-compliance linked to offshore corporates owning UK property.

Having reviewed data, including from the Land Registry, HMRC said it had identified non-resident corporate owners of UK property that might not have met certain UK tax obligations. Depending on the circumstances, it intended to issue one of two letters. These would be accompanied by a Certificate of Tax Position and would also recommend that the companies should request connected UK-resident individuals to ensure their personal tax affairs were up to date.

One letter will be issued to non-resident companies that own UK property and may need to disclose income received as a non-resident corporate landlord or a liability to the Annual Tax on Enveloped Dwellings (ATED).

Under the Transfer of Assets Abroad (ToAA) legislation, UK-resident individuals who have any interest in the income or capital of a non-resident landlord, whether directly or indirectly, may be within the ToAA income charge provisions at s721 and s727 ITA 2007. UK-resident individuals that benefit from a transfer made by somebody else (e.g., occupation of property) may be within the ToAA benefits charge at s731 ITA 2007.

The second letter will be issued to non-resident companies that appear to 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. Where the company purchased the property before April 2015 and the whole of any overall gain is not charged to NRCGT, then that part of any gain not charged may be attributable to the participators in the company under s13 (now s3) TCGA 1992. Such corporates may further be liable to pay UK tax on rental profits, income tax under the transactions in land rules and/or ATED.

The HMRC-sponsored Wealthy External Forum (WEF) has also announced that it will be sending out ‘nudge letters’ to individuals who are recorded as ceasing to be ‘Persons of Significant Control’ in respect of unquoted companies.

Launched in 2009, the WEF team deals with the personal tax affairs of the UK’s wealthy individuals and is focused on the operational processes and technical tax issues that impact ‘Wealthy’ customers.

The nudge letters will be sent to individuals who, on ceasing control, have disposed of part or all their shareholding in a company in 2020/21 and did not record any such disposals for Capital Gains Tax purposes on their Self-Assessment tax return. Disposals can be made by:

  • Selling shares for cash
  • Exchanging shares in one company for shares in another company
  • Giving shares away

WEF advises recipients to check the position and amend their tax returns by 31 January 2023. They will be required to pay CGT if the total gains from all disposals in a tax year are over the annual exempt amount. Failure to do so, if omissions are outstanding, could result in HMRC launching an enquiry.

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