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HMRC has identified non-resident corporate owners of UK property that may not have met certain tax obligations

The Wealthy External Forum is a joint forum between HMRC’s ‘Wealthy’ Teams and professional bodies representing ‘Wealthy’ individuals. It has published this briefing.

HMRC has identified non-resident corporate owners of UK property that may not have met certain tax obligations. It is expected in June 2022 that a campaign of nudge letters will be launched. Depending on the circumstances, two different letters may be issued.

While the letters are addressed to the corporates, both also recommend that the companies should ask connected UK-resident individuals to ensure their personal tax affairs are up to date in respect of the related anti-avoidance provisions.

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. A UK resident who has not personally transferred assets but benefits from a transfer made by somebody else (eg occupation of property) may be within the ToAA benefits charge at s731 ITA 2007. The letter recommends that any such individuals should seek professional advice to ensure their affairs are up to date.

The other letter will be issued to non-resident close 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 return.

Where the company purchased the property before April 2015 and the whole of any overall gain is not charged to Non-Resident Capital Gains Tax (or otherwise), then that part of any gain not charged may be attributable to the participators in the company under s13 TCGA 1992 (these rules have since been relocated to s3 TCGA 1992). Again, the letter suggests that any individual participators should seek professional advice to ensure their affairs are up to date.

Future compliance activity

The availability of Automatic Exchange of Information (AEOI) data means that HMRC can identify the beneficial owners of non-resident entities that own UK property.

We will shortly contact those UK-resident beneficial owners who may have failed to declare income or gains that should be taxed under the respective anti-avoidance provisions. This will consist of 1-2-1 compliance checks and will not be limited to these two provisions where other potential risks are identified, particularly where those risks relate to international matters.

For wealthy individuals, this programme will be led by our Complex International team but will be conducted in conjunction with other areas of HMRC compliance such as Individuals and Small Business Compliance, Mid-Sized Business and the Non-Resident Landlord Team.

Individuals who have failed to disclose income or gains are advised to amend SA returns or, where out of time to do so, make disclosures using the Worldwide Disclosure Facility. This will reduce the likelihood of HMRC opening a full compliance check into their affairs.

ToAA – updated guidance

We will also update the Forum on the publication of the 2013 draft ToAA guidance and the onward gifts guidance. We can confirm that the publication of the guidance is imminent, and we will ensure that, once in the International Manual, the Wealthy External Forum Secretariat communicates this to you.