Some advice regarding overseas assets, income or gains nudge letter

Jeremy535897

waribai said:

Yes. According the literature though it seems this carries over if unused…

Yes, but it is charged when the policy comes to an end:
https://www.rl360adviser.com/planning/chargeable-events/calculation-liability.htm

waribai

Ok, but then what if the policy has matured but has not yet been fully encashed?

 Anyway, I am fairly confident too that this is income tax on an offshore bond. In which cases with TAR, withdrawal allowances, and top slicing added to the fact the bond is matured but not fully encashed, I  think at worst I owe £200.

I will phone Scottish Provident tomorrow to clarify that it is an offshore bond then call HMRC to find out what it is all about. In the worst case scenario of owing the above sum for 2020/2021 how should I approach HMRC?

Jeremy535897

waribai said:

Ok, but then what if the policy has matured but has not yet been fully encashed?

 Anyway, I am fairly confident too that this is income tax on an offshore bond. In which cases with TAR, withdrawal allowances, and top slicing added to the fact the bond is matured but not fully encashed, I  think at worst I owe £200.

I will phone Scottish Provident tomorrow to clarify that it is an offshore bond then call HMRC to find out what it is all about. In the worst case scenario of owing the above sum for 2020/2021 how should I approach HMRC?

I suspect maturity date will be the relevant date, but they should issue you with a chargeable events certificate. I don't know what the HMRC letter said, but if it is to do with this bond, it will be to do with the fact that RL360 will have sent a copy of a chargeable event certificate to HMRC. You may already be facing interest and penalties, so i suggest you contact RL360 to find out exactly what you should have declared and when, work out the tax based on the deduction for time apportionment, the 5% withdrawal rule and top slicing relief, and write to HMRC with your response within the time frame they have given to you. If the amounts involved could be in any way material, you should take professional advice.

waribai

Thanks. I appreciate the advice. But I have not received any correspondence from RL360  with regard to a chargeable certificate maybe because I told them I wanted to leave the policy and not fully encash it?

As for HMRC. It is a generic letter that I have now over the weekend found elsewhere on the web. It goes…

Dear….

Your overseas assets, income or gains

We have information that shows you may have received overseas income or gains that you may have to pay UK tax on. We have received this information through the UK's tax information exchange agreements with other countries.

We want to help make sure you are paying the right UK tax on your overseas income and gains.

We have compared the information we have received with your tax record and tax return(s). We believe that you may not have paid the right amount of UK tax. There may be a reasonable explanation for this.

We are giving you the opportunity to review your tax affairs and to tell us about anything that you may need to put right. Some people with assets overseas have found that earlier tax advice is out of date after changes to their personal circumstances or to tax laws.

Please help us to make sure the information we hold about your tax affairs is accurate. You can do this by checking that you have told us about all of your UK tax liabilities from all overseas income or gains. Please complete the enclosed certificate and send it to us by 03 December 2023.

What you need to do

If you:

• find that you need to bring your tax affairs up to date, you can do this now by using our Worldwide Disclosure Facility, go to www.gov.uk and search for Worldwide Disclosure Facility' - please tick box 1 on the certificate
• have declared your overseas income on your tax return - please complete box 2 on the certificate and confirm the boxes) on your tax return where it was included
• have overseas income as part of a UK investment portfolio and you have declared this on your tax return - please complete box 2 on the certificate to confirm the boxes) on your tax return where it was included
• have not declared your overseas income and gains as you do not complete a tax return and believe that the income or gains are covered by personal allowances or reliefs - please tick box 3
• have not declared your overseas income or gains as you believe they are not taxable in the UK, and you are satisfied that this is correct - please tick box 4

If you are not sure you have told us about all your overseas income or gains that you must pay UK tax on, we recommend getting professional tax advice.

Please take this opportunity to check your tax affairs and act now to bring them up to date.

We regularly carry out checks. We are giving you this opportunity to tell us about all your taxable income or gains. If we later find that you have not told us everything, we will view this very seriously. We could then carry out an investigation and this could result in significant penalties or lead to you being prosecuted.

Jeremy535897

According to RL360, maturity triggers a chargeable event:
https://www.rl360adviser.com/planning/chargeable-events/event-types.htm

If you have no other overseas assets that generate income or gains, it would seem that it is this bond that is causing the issue. You need to clarify the situation with RL360, in connection with the money you took out earlier, and the bond maturity. As I said earlier, you may need to take professional advice.

waribai

So, I rang HMRC and to be fair the guy I spoke to was very helpful. At first he could not find anything with the reference number I gave him and said probably the file had not been updated as the letter was only sent out on October 30th. He promised to call me back though which he did within a few minutes.
He then confirmed that it involved a potential capital gains (Yes, Capital Gains. I confirmed this with him) tax liability of £11k. I explained that if it was CGT with TAR, I would be well within my personal allowance. He said in that case,  I  should just tick box 3 and send the form back. I asked if I should send any calculations. To which he said no, signing the form that you were within the allowance is much less hassle "for all concerned"
I'm not sure what to do now a) because I am surprised that it is after all Capital Gains and b) all the advice on the web seems to be to not sign the form and instead send a separate letter.

Jeremy535897

It isn't capital gains  if it is an offshore bond. This is why I said speak to RL360 first. I don't think you can rely on a telephone conversation with HMRC on this matter. Did you record it?

[Deleted User]

I would have to say that the likelihood of an HMRC call centre representative having good knowledge of such a topic would be minimal, as has been proved. 

Having said that, the bigger error was to advise you completely incorrectly.

waribai

Thanks. Phoned I had been paying in £250 per month since Sept 2002. Obviously, they could not advise on tax but with my TAR the gain comes down to £8000 add in top slicing relief on a salary of £43k and I believe my liability specifically for 2020-2021 is £0?
Happy to pay for advice if  this looks completely wrong and the amount I owe  actually seems substantial.......!

[Deleted User]

If the chargeable gain is £8000 and your TAXABLE salary is £44000, you would pay £1730 at 40% (an extra £346) without a claim for top slicing relief. ( It could also impact any child benefit claim).

To claim this you really need assistance from the provider in detailing what would normally be on a chargeable event certificate - amount of gain and relevant years as this is the information required on a return.