HMRC Nudge Letter - Foreign Income - How To Respond?

D924

coyrls said:

It's not to do with where your broker is located, it's the funds that you invest in that matter.  You need to check if the funds have UK reporting status.  It there is a UK factsheet for the funds from the fund provider, that means it's pretty certain that they have UK reporting status.

gravlax said:

You can look up funds that HMRC have listed as having UK reporting status
https://www.gov.uk/government/publications/offshore-funds-list-of-reporting-funds

Alright, it seems that the definition of "funds" is pretty strict. I've only been buying USA company shares through my broker so in that case it shouldn't be relevant. Same should go for cryptocurrencies purchased through EU exchange.

masonic

blenz101 said:

masonic said:

blenz101 said:

Well the general rule is that if you are receiving income which isn't taxed at source then you should be completing a self assessment showing all of the calculations.

I've never provided any calculations related to untaxed income I've received, though I've done the calculations and could make them available upon request.

Sorry, perhaps I worded it badly.  I more meant that you should be declaring all of your income that isn't taxed at source and providing HMRC a breakdown via self assessment.  If they want to see the detailed calculations they will ask.

Obviously by not declaring it, even if it is with your allowances, results in getting their attention as the OP has discovered.  In the event of an investigation if a liability was subsequently found then the penalties are designed to be punitive. 

You only need to register for self assessment if you meet certain criteria. Many people have taxable savings interest that is dealt with automatically by HMRC, or other income that they can notify HMRC about through their personal tax account without the need to self assess. Where there isn't a liability, for example savings interest and dividends within nil rate band and capital gains within allowance, and the individual doesn't self-assess, then no action is needed.

If registered for self-assessment, then you must declare all income requested, but your return wouldn't normally include capital gains from equity investments unless there is a liability, loss to carry forward, or you had made total disposals worth more than 4 times the CGT allowance.

Aidanmc

MarcoM said:

D924 said:

I've received a nudge letter from HMRC referring to my foreign assets (a share dealing account based in Europe) and suggesting that I need to check my taxes are correct.

I know that my gains are below the dividend and capital gains allowances, no problems there. The CRS standard only reports total proceeds so HMRC have no way of actually knowing this, however. They just know the total proceeds.

My main goal here is avoiding an investigation as although I have nothing to hide it is stress I don't need.

Would it be better to just send back the form, ticking the "my gains are covered by allowances" box, or should I also send a covering letter explaining in detail my gains and losses for the tax years they are questioning? I have never had to deal with HMRC before and I have always been very careful to stay within the allowances so I wouldn't have to!

Assuming you are already providing a self assessment, I would respond with a letter stating that your foreign income is already reported in your SA.

I received a similar letter a couple of years ago and was told by an advisor to send them a letter referring to the SA and not sign their form.

Does the correspondence you received  have a certificate requiring you to certify that your tax returns are correct and that you have nothing to disclose? If so it could be a generic letter based on information received by HMRC under the "global" common reporting standards.

Does the letter say you should only reply if there is anything to disclose? 

That's what I done a few years ago also, sent a letter rather than the form

D924

masonic said:

You only need to register for self assessment if you meet certain criteria. Many people have taxable savings interest that is dealt with automatically by HMRC, or other income that they can notify HMRC about through their personal tax account without the need to self assess. Where there isn't a liability, for example savings interest and dividends within nil rate band and capital gains within allowance, and the individual doesn't self-assess, then no action is needed.

If registered for self-assessment, then you must declare all income requested, but your return wouldn't normally include capital gains from equity investments unless there is a liability, loss to carry forward, or you had made total disposals worth more than 4 times the CGT allowance.

I'm not registered for self assessment as I don't need to be.

As I understand it even if my disposals are more than 4 times the CGT allowance this still doesn't require me to register for self assessment, it just has to be repored if I was already self-assessing... right?

masonic

D924 said:

As I understand it even if my disposals are more than 4 times the CGT allowance this still doesn't require me to register for self assessment, it just has to be repored if I was already self-assessing... right?

No, it doesn't require you to register for self assessment. It does need to be reported, but this can be done by writing to HMRC (or if you have lots of time on your hands, phoning them).

D924

masonic said:

D924 said:

As I understand it even if my disposals are more than 4 times the CGT allowance this still doesn't require me to register for self assessment, it just has to be repored if I was already self-assessing... right?

No, it doesn't require you to register for self assessment. It does need to be reported, but this can be done by writing to HMRC (or if you have lots of time on your hands, phoning them).

It seems they found out through the CRS, is that enough for my reporting obligations to be fulfilled?

I did not even realise that my disposals had exceeded 4 times the capital gains tax limit in that year as I had actually made only £24k of real disposals (of shares) but the complexities of CRS accounting increased this to £69k (due to disposals of money market fund, in one case to buy shares and in another to make a withdrawal).

masonic

D924 said:

masonic said:

D924 said:

As I understand it even if my disposals are more than 4 times the CGT allowance this still doesn't require me to register for self assessment, it just has to be repored if I was already self-assessing... right?

No, it doesn't require you to register for self assessment. It does need to be reported, but this can be done by writing to HMRC (or if you have lots of time on your hands, phoning them).

It seems they found out through the CRS, is that enough for my reporting obligations to be fulfilled?

I did not even realise that my disposals had exceeded 4 times the capital gains tax limit in that year as I had actually made only £24k of real disposals (of shares) but the complexities of CRS accounting increased this to £69k (due to disposals of money market fund, in one case to buy shares and in another to make a withdrawal).

Personally, for peace of mind, I'd check with them.

D924

masonic said:

Personally, for peace of mind, I'd check with them.

I had a google.

https://www.gov.uk/capital-gains-tax/work-out-need-to-pay

As I'm not registered for self assessment and I'm resident in the UK I don't need to report these gains.

Worth knowing if I ever end up self employed though.

Also worth knowing that I need to report my losses if I want to claim them against future tax years... although with the state of my investments this year it's unlikely I'll be any where near the CGT allowances.

masonic

D924 said:

masonic said:

Personally, for peace of mind, I'd check with them.

I had a google.

https://www.gov.uk/capital-gains-tax/work-out-need-to-pay

As I'm not registered for self assessment and I'm resident in the UK I don't need to report these gains.

A couple of things:

1) That's not what it says. The actual statement is that "You still need to report your gains in your tax return if both of the following apply: the total amount you sold the assets for was more than 4 times your allowance (AND) you’re registered for Self Assessment".

As you're not registered for self assessment and you're resident in the UK, you don't need to report these gains in a tax return. It does not mean you do not need to report them at all. The situation differs depending on which tax year the disposals were made in.

2) That page refers to the system for disposals made after 5th April 2020. For disposals made prior to that you had to register for self-assessment and report your gains. See the second flow chart in the following link:

https://www.rossmartin.co.uk/private-client-a-estate-planning/capital-gains-tax/3350-reporting-capital-gains

So the question would be, which tax years are they asking about? If you made disposals in excess of 4 x annual exempt amount prior to 6th April 2020, then those should have been declared.

D924

The tax year in question is 2019/2020 where I disposed of (SOLD) £24k worth of shares but they are inflating it to £69k because apparently currency conversion is considered a disposal so that put me over 4 times the allowance without realising it.

This is briefly the account statement:

Sep 2019: Converted £16k to $20k (at 1.2366) - appears on my statement as a disposal of a GBP cash fund at a slight gain.

Feb 2020: Bought $33k (£25.4k at 1.30) worth of stocks - appears on my statement as a (single) disposal

Mar 2020: Sold the same stocks for $27k (£23.5k at exchange rate 1.1492) - five disposals - four losses and one gain in GBP terms

April 2020: Converted funds back to GBP at 1.2353 and withdrew £19k - treated as a disposal and a gain in GBP terms

So that's where they're getting their £68k-ish for calendar year 2020.

Tax year 2019/20 is even worse at £84k worth of "disposals" even though in reality I made an overall loss and there is no tax to pay.

This is basically game over for my life then, I will owe more in fines than my net worth because I will owe a £300 fine for late reporting on every unreported transaction in the year. Is there anything I can do or am I utterly !!!!!!?