UK Tax Whirlwind

New UK Tax Blitz Traps Brits…

Buy to Let Tax Blitz, German Spy traps British Offshore Accounts in Lichtenstein, new Inheritance Tax worry…

Many folk now have multiple sources of income ranging from selling items on Ebay to Buy To Let Property Portfolios and as ever the Tax Man cometh, watching carefully for his requisite slice of your profits.

He may seem to be quietly out of sight just now, but if you are involved with anything that follows below, pretty soon your letter box will rattle or doorbell ring with a call from the Tax Man. These income sources are too fat and lucrative to ignore are far as the Revenue are concerned!

The three hot topics currently triggering serious HMRC Tax Investigations are – Buy To Let Property Gains, Offshore Bank Disclosure and Inheritance Tax Avoidance.

Buy To Let Investors to Face a Brutal New Tax Offensive?

Suddenly and without warning the Revenue just launched a new Tax crackdown on Buy to Let Investors.

As reported by The Times on 29th February 2008, HMRC have been scouring UK Letting Agencies, forcing them to provide lists of those for whom they rent properties for.

HMRC are sending out hundreds of letters to those with Buy to Let properties but who they believe have failed to fully declare their profits in their Self Assessment Tax Returns due in by 31st January 2008.

If you receive one such letter you will need to take it seriously, go for full disclosure and try to come to a negotiated settlement which may reduce the penalties you incur says Peter Goodman a Senior Tax Expert at Wilkins Kennedy Accountants speaking in the Times article I mentioned above.

What is certain is that if you are on the lists they’ve obtained from the Letting Agencies, you’re already flashing away merrily on their radar so it’s better to face the music now rather than later. If you’ve made good money from Buy to Let and you’ve not declared it yet then please move quickly – before HMRC do.

Next, look what’s happening to money Brits thought they had safely squirrelled abroad…

The Offshore Tax Deadline has Expired: 30,000 people under investigation

In 2007 Tax Inspectors forced High Street Banks to grant full access to the private accounts of those they suspected of having undeclared offshore assets. The deadline for disclosing these assets via the new ‘Offshore Disclosure Facility’ passed on 26th November 2007 and although this facility was supposedly an ‘Amnesty’ you will still pay full tax, interest and a 10% penalty if it applies to you.

Even if you ‘confessed’ the Revenue refuses to guarantee not to prosecute you in future!

As many as 30,000 people UK wide are now under investigation on the basis that HMRC thinks they should have made a disclosure, according to HMRC Director General Dave Hartnett in a TV interview for Accountancy Age in November 2007.

He also said “The tax body is looking to obtain (further) offshore account details for 175 banks and other financial institutions in a bid to widen the net it cast with the UK’s top five banks.”

If you have offshore accounts or property abroad which makes you money, please seek expert accountancy advice as soon as possible and prepare your case well to comply with the Tax Inspectors.

This is even more important in the light of the recent news that German Tax Inspectors successfully “cracked” one of the most secure offshore facilities in the world using Cold War spy tactics to steal records of German Tax Payers who held what they thought were previously safe offshore accounts in Lichtenstein. The sweep has picked up UK account holders too.

So with our ever deepening European integration what did Britain do?

The same of coursethey paid to get these very same spying results for UK accounts too.

The Inland Revenue paid an informant £100,000 to get hold of secret data on British citizens with offshore accounts held in Lichtenstein. On February 26th, 2008 Accountancy Age reported that HMRC had paid £100,000 for the records of all UK citizens caught in the net.

They are now actively following up the details of all those they’ve discovered through these covert operations in Lichtenstein – so more likely than not, if you have an account in Lichtenstein then you will receive a knock on the door from the Inland Revenue very shortly. You need to be prepared to comply if this applies to you.

If you are concerned about such offshore disclosure you need to get good advice fast from first class Offshore Tax Accountancy Specialists, because you’ll need them.

Doesn’t all this ‘spy stuff’ frighten you just a little – yikes, look what’s next and it applies to everyone in UK…

Was Santa good to you at Christmas? Well HMRC is now looking at your gifts…

Have you recently given money ‘gifts’ to children or received them from parents yourself? If so the Revenue is likely to be very interested in you because of what follows…

The Chancellor recently changed the rules on Inheritance Tax, so that the combined limit for couples is now £600,000 rising to £700,000 in 2010. So is this a case of the Government rewarding the thrift of hard working families who’ve built wealth through the rising value of their personal homes or Buy To Let property portfolios?

Well, just when it seems the Chancellor has become a little more generous the reality is complex and a lot more worrying than it first appears.

As we speak the Revenue is methodically sifting through mountains of our personal financial information such as bank statements and pension plans to locate monies that may have been given as ‘gifts’.

HMRC officials say they “will be paying particularly close attention” to gifts affected by the Seven Year Rule – which covers gifts given by parents to offspring such as valuables, property and cash (even for Christmas) made during the seven years before the donor’s death. They want to ensure all such gifts have been declared and taxed.

Considering that parents pay on average £21,314 to help their offspring buy their first home according to the latest findings by Credit Action (Debt Stats Sept 2007) it’s important you don’t ignore this new Revenue probe if you have given or received similar such gifts. HMRC know that family ‘loans’ often get ‘forgiven’ – unfortunately the Revenue are not in the forgiveness business.

Systematic random cross-checks are now being run on tax returns filled out when a person dies. A reference to these intentions was made in the Revenue’s own online Newsletter back in August 2007.

Now though, this new tax initiative is fully under way.

Therefore, bereaved taxpayers could not only face bills for any unpaid tax, but also financial penalties if information relating to transfers up to seven years ago is unclear or in any way incomplete.

So What To Do Next?

As I mentioned Inheritance Tax planning is increasingly complex, especially with the new changes.

Above all you cannot leave things to fester, lie dormant and imagine that the issues highlighted above will go away because sadly they won’t – the same goes with regard to the other tax investigation areas I’ve pinpointed today.

The one thing you don’t want to do is to trigger an investigation into your private or business affairs from the Inland Revenue – whether it’s about Inheritance Tax Avoidance or Buy to Let Profits that have not been declared, it’s just too stressful (or downright harrowing) to have to go through – especially if it comes completely out of the blue due to something as simple as helping your children buy their first house and perhaps forgetting to declare it to HMRC -it’s easily done.

These things, which are easily overlooked can have profound consequences on your wealth especially when it comes to planning for your retirement. The last thing you want after having worked so hard all your life is too lose massive chunks of that wealth to the Revenue through bad Inheritance Tax or unwise financial planning all round. What’s the point of building alternate wealth streams through Buy to Let etc to provide for your retirement and a secure future for your loved ones when it can all be lost through inadvertent financial miss-planning?

Finally, I’m reminded of something the Telegraph recently reported, citing a survey by Skandia which found that two out of every three people did not start putting in place financial plans for their retirement until their 50th birthday – are you one of those two out of every three?

To finish up, whatever you do, please don’t leave your Inheritance Tax Planning or Retirement Plans too late – especially if you are concerned about the new Inheritance Tax investigations now under way. You are welcome to contact me for help in these areas and if any of the other issues I’ve raised have touched you, then I can connect you with first class accountants who specialise in tax investigation cases.

Wise financial planning – in today’s increasingly complex world none of us can do without it.

Give me a call freephone from a landline on 0800 321 3508 or direct to my mobile : 07803 508 187. You can also contact me below. I’ll be happy to help and remember your first appointment with me is 100% free and without obligation.

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Dates and Times

NOTE: I have been writing articles here since 2007 so please take note the date of the article, because obviously, things like laws or tax allowances etc may have changed since then.

I do try my best to keep up to date, but I'm only an humble advisor and there are hundreds of my financial articles here! Please call or email if you need to double check something. I'll gladly help.