Some advice regarding overseas assets, income or gains nudge letter

waribai

Thanks. Sorry that was my salary before deduction of the £12.5k personal allowance .
. My income minus the £12.5k personal allowance for 2020-2021 was £32k. My time abroad was 2040 days and I had held the policy by December 2020 for 6060 days in total. With the chargeable gain being £11500, maybe I actually owe HMRC around £1325. Maybe I can approach them for a settlement in installments? I appreciate the help!

[Deleted User]

Your taxable salary is £44000 i.e. the amount of income that attracts tax in the U.K. 

You have indeed a personal allowance to set against this taxable income leaving an amount chargeable to tax of just under £32000.

My previous post still fully applies. If the income of £8000 is added, £1730 would be chargeable at 40%. 

However you are entitled to claim relief on the ‘slice’ as the £8000 was not actually attributable to one tax year. 

For example, the policy was in force for 20 years. The ‘slice’ is £400 (8000/20) which, if added to your income of £44000, would keep you a basic rate taxpayer. You therefore claim top slicing relief of £346.

Jeremy535897

Remember top slicing relief can only reduce your tax rate to basic rate. On an offshore income bond there is no basic rate tax credit, so there is still the basic rate to pay.

[Deleted User]

Jeremy535897 said:

Remember top slicing relief can only reduce your tax rate to basic rate. On an offshore income bond there is no basic rate tax credit, so there is still the basic rate to pay.

Can’t be over emphasised.

So, in the £8000 example above, the tax payable is £1946 without TCR, £1600 with.

waribai

Thanks. This is much appreciated. What would be the best way to disclose this?
 I am still slightly tempted to call back, record the phone call and if they still insist it is Capital Gains go with that!

Jeremy535897

The amount is modest, if you have calculated it correctly. If you are absolutely sure that there is nothing else to declare, my recommendation would be to write back to HMRC, setting out in precise detail the omitted offshore income gain, and your calculation of the additional tax due. If RL360 never sent you a chargeable event certificate, say so, and explain that you thought it was covered by the 5% withdrawals, if that is the case.

I would not recommend that you call again. You already know that the advice you received was incorrect. You may well be advised in a second call that it was incorrect. But if you are again incorrectly advised that it is a capital gains tax matter, what do you do then? If you make no other response to the nudge letter, you are likely to get a much nastier communication, and then you will be defending your position with a recording of a telephone call that could be with anyone. If you write and explain you have been informed by HMRC that it is a capital gains tax matter covered by your annual exemption, that will almost certainly be disputed, and again you are in a worse position.

waribai

Yes. I think that makes sense. So, I should just send my calculations in the form of a letter rather than use the WDF? Will they then send me the bill?

Jeremy535897

I have not had the misfortune to need to look into the best approach to this question, and I am now wondering whether simply answering their letter with yours is the best option. You should start by studying what HMRC says:
https://www.gov.uk/guidance/worldwide-disclosure-facility-make-a-disclosure

If you are not wholly comfortable calculating the gain, or the interest and penalty element, you should seek professional advice. See for example:
https://www.franciswilksandjones.co.uk/smes-directors-shareholders/tax-disputes/tax-disclosure-investigation/?utm_term=worldwide disclosure facility&utm_source=google&utm_medium=cpc&gclid=Cj0KCQiAo7KqBhDhARIsAKhZ4ug2SjO3vE5gtzUcO1Rl1eigRSJoPp01v5NDIusHqkx4tlAkbwZGH7MaAl5fEALw_wcB

Cook_County

HMRCs nudge letter is non-statutory. I t would be daft to ever sign the non-statutory certificate HMRC provide. You are describing an offshore bond. We do not know how this was taxed in the country of residence when you lived outside the UK - but we do know for certain that the profit is subject to UK income tax - with top slicing relief.  It is not an offshore income gain. The WDF will get to the lowest possible penalty. 

Jeremy535897

Cook_County said:

HMRCs nudge letter is non-statutory. I t would be daft to ever sign the non-statutory certificate HMRC provide. You are describing an offshore bond. We do not know how this was taxed in the country of residence when you lived outside the UK - but we do know for certain that the profit is subject to UK income tax - with top slicing relief.  It is not an offshore income gain. The WDF will get to the lowest possible penalty. 

Yes, I meant offshore income bond, not gain, but both are subject to income tax.