Tax on assets abroad - what is an "asset", what must be reported? Help needed pls

Advice2017

Hi

Hoping someone can help.

An elderly relative has just received a letter from HMRC asking to "bring your worldwide tax affairs up to date".

We think HMRC have found out about money transferred overseas. The money was to buy a small plot of land with a view to building a house on it to take holidays, with it ultimately being a form of early inheritance for a younger family member.

Firstly, the building never happened for a variety of reasons to do with bad economy and lack of planning permission. So the land is still owned but is vacant and produces no income etc at all. It is never used or visited by anyone in the family.

Secondly, the land was purchased in the name of an adult child with the idea that that child would ultimately inherit the land so it would be easier to have it already registered in that name.

So the monies were transferred out (around £40,000) but my relative owns nothing to show for this - no bank accounts, and doesn't "own" the land. Never visits it or anything. It's worth a fraction of the original purchase price (economic crash and lack of planning permission) and on a sale would probably lead to a financial loss, rather than any gain.

Pls can anyone help on how to fill out the HMRC form? As it stands, my relative doesn't own an asset (it's in the name of another) or have any income or bank account abroad.

We think HMRC obtained information from the brokers who transferred the money out.

How should the form be completed? Is it enough to say they own no asset and have no income abroad, which is true or do they need to explain having gifted the monies to buy land in the name of another? Was there any onus at the time to declare sending monies abroad? She is elderly and at the time didn't know about or think about any of these implications.

Many thanks for any advice.

antrobus

Advice2017 wrote: »

...

How should the form be completed? Is it enough to say they own no asset and have no income abroad, which is true or do they need to explain having gifted the monies to buy land in the name of another? Was there any onus at the time to declare sending monies abroad? She is elderly and at the time didn't know about or think about any of these implications.

Is it one of these?

The letter requests that the taxpayer complete a ‘Certificate of tax position’ by a due date and that they confirm either (i) there affairs are up to date, (ii) they need to be brought up to date via HMRC’s worldwide disclosure facility or (iii) they do not have any offshore assets, income or gains.

https://www.taxadvisorypartnership.com/blog/non-dom-tax/common-reporting-standards-offshore-income-hmrcs-certificate-tax-position/

If so, then your elderly relative has no offshore assets, income or gains. Of course, it might help if the elderly relative wrote to HMRC to explain that the 40k was a gift to A N Other and used for the purchase of a plot of land in Tuscany or wherever.

Presumably the beneficary is aware of this?

Keep_pedalling

Tax wise this is currently not an issue, although if he dies within 7 years of making this gift the £40k remains part of his estate for IHT calculation purposes.

Sounds like £40 down the drain though, and if I were owner of this plot I would be looking to get rid ASAP in case Brexit make things more difficult to do something with it down the line.

Cook_County

HMRCs intervention letter is non-statutory. Most advisers reply in writing but advise never to complete HMRCs bizzaro certificate as it has no basis in law.