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    • Keep pedalling
    • By Keep pedalling 11th May 18, 7:24 PM
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    Keep pedalling
    Offshore Reporting Funds Excess Income
    • #1
    • 11th May 18, 7:24 PM
    Offshore Reporting Funds Excess Income 11th May 18 at 7:24 PM
    Offshore Reporting Funds Excess Income is something I had never heard of until my latest Transact GIA investor report came out, with a section covering this. It is only a very small amount, but it has been included in my latest tax return unlike previous years when it wasnít, because I was totally ignorant of its existence and lack of any report as to the amount that needed to be declared.

    A quick Google seems to suggest I am not the only one, and it seems to be a difficult area for many professionals as well . So what are the chances that HMRC are chasing up this unpaid tax which has undoubtedly been missed by a lot of people who hold offshore funds outside of an ISA or SIPP?
Page 1
    • jimmo
    • By jimmo 11th May 18, 11:31 PM
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    jimmo
    • #2
    • 11th May 18, 11:31 PM
    • #2
    • 11th May 18, 11:31 PM
    Being the honest, upright citizen you clearly are you will be making a voluntary disclosure anyway but a couple of thoughts:
    What you consider to be a very small amount could be considered a significant amount by others.
    The Taxman has an inbred tendency to think that if there is a small omission what else might be wrong?
    The risk assessment process is much more computer orientated than it was in my day. You have reported the excess income in your latest Return and a computer process is, in my opinion anyway, far more likely to flag up the excess income as a new source of income with no history than a human being would.
    If you make a voluntary disclosure a human being will have to handle that and choose how to deal with it.
    If you leave things as they are a computer system will make the initial decisions and, even in my days there were people who would not go against the computer and open a formal enquiry.
    The cost to you of that seems far more likely to be time and pressure than money.
    Do you feel lucky?
    • tg99
    • By tg99 12th May 18, 12:31 AM
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    tg99
    • #3
    • 12th May 18, 12:31 AM
    • #3
    • 12th May 18, 12:31 AM
    Being the honest, upright citizen you clearly are you will be making a voluntary disclosure anyway but a couple of thoughts:
    What you consider to be a very small amount could be considered a significant amount by others.
    The Taxman has an inbred tendency to think that if there is a small omission what else might be wrong?
    The risk assessment process is much more computer orientated than it was in my day. You have reported the excess income in your latest Return and a computer process is, in my opinion anyway, far more likely to flag up the excess income as a new source of income with no history than a human being would.
    If you make a voluntary disclosure a human being will have to handle that and choose how to deal with it.
    If you leave things as they are a computer system will make the initial decisions and, even in my days there were people who would not go against the computer and open a formal enquiry.
    The cost to you of that seems far more likely to be time and pressure than money.
    Do you feel lucky?
    Originally posted by jimmo
    From memory though when I last filled in my tax return (16-17) the excess reported income is not inserted as a separate entry. Instead you just include it with the foreign income as it is taxed in the same way as a foreign dividend for the offshore fund / etf in question,
    • antrobus
    • By antrobus 12th May 18, 6:48 AM
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    antrobus
    • #4
    • 12th May 18, 6:48 AM
    • #4
    • 12th May 18, 6:48 AM
    Being the honest, upright citizen you clearly are you will be making a voluntary disclosure anyway but a couple of thoughts...
    Originally posted by jimmo
    You misunderstand.

    These are Offshore Reporting Funds. The funds are 'offshore' because the funds are being managed outside the UK, in exotic locations such as Ireland and Luxembourg. They are 'reporting funds' because they have successfully applied to HMRC for reporting fund status. As the name suggests, that means they report to HMRC.

    So voluntary disclosure does not really come into it.

    The issue is that not all these Reporting Funds distribute all their income to investors; any income not distributed is considered as 'excess income'. Investors are taxed on the excess income in addition to the distributed income, even though they haven't received it. I believe that the excess income becomes part of the acquisition cost for CGT purposed.
    • Keep pedalling
    • By Keep pedalling 12th May 18, 9:01 AM
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    Keep pedalling
    • #5
    • 12th May 18, 9:01 AM
    • #5
    • 12th May 18, 9:01 AM
    Being the honest, upright citizen you clearly are you will be making a voluntary disclosure anyway but a couple of thoughts:
    What you consider to be a very small amount could be considered a significant amount by others.
    The Taxman has an inbred tendency to think that if there is a small omission what else might be wrong?
    The risk assessment process is much more computer orientated than it was in my day. You have reported the excess income in your latest Return and a computer process is, in my opinion anyway, far more likely to flag up the excess income as a new source of income with no history than a human being would.
    If you make a voluntary disclosure a human being will have to handle that and choose how to deal with it.
    If you leave things as they are a computer system will make the initial decisions and, even in my days there were people who would not go against the computer and open a formal enquiry.
    The cost to you of that seems far more likely to be time and pressure than money.
    Do you feel lucky?
    Originally posted by jimmo
    My question was not really about whether the taxman would chase me personally, but would attempt to recover what most people holding offshore funds would have likely to have missed due to the obscurity of these excess incomes. There is no separate place to file these on your tax returns, and until this year they have not appeared on any tax reports ( so presumably they were not reported to HMRC either)

    When I said small amount it was around £100 this year and made no difference to the amount of tax I paid, as I was still under my dividend and interest allowances. I doubt whether it would have had any impact the previous year either, but this goes back to 2009 however when it very well might have made a difference, as my GIA account was much larger and the dividend and interest allowances did not exist.

    The average Joe filling in their returns will not have picked this up, and there does not seem a simple way to retrieve the info either. From what I have read from other sources it seems that a lot off accountants are no better off than the average Joe with their understanding of this issue, so in all likelihood the vast majority of any tax due on this has slipped under the radar.
    • tg99
    • By tg99 12th May 18, 3:39 PM
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    tg99
    • #6
    • 12th May 18, 3:39 PM
    • #6
    • 12th May 18, 3:39 PM
    I believe that the excess income becomes part of the acquisition cost for CGT purposed.
    Originally posted by antrobus
    Yep for CGT purposes you treat it the same way as you would the dividend income for an accumulating fund / etf so just add to the acquisition cost.
    • Keep pedalling
    • By Keep pedalling 12th May 18, 4:12 PM
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    Keep pedalling
    • #7
    • 12th May 18, 4:12 PM
    • #7
    • 12th May 18, 4:12 PM
    Yep for CGT purposes you treat it the same way as you would the dividend income for an accumulating fund / etf so just add to the acquisition cost.
    Originally posted by tg99
    The hard bit it will be getting the numbers in the first place.
    • tg99
    • By tg99 12th May 18, 4:58 PM
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    tg99
    • #8
    • 12th May 18, 4:58 PM
    • #8
    • 12th May 18, 4:58 PM
    The hard bit it will be getting the numbers in the first place.
    Originally posted by Keep pedalling
    Iíve generally been able to find most of mine just by googling say ishares excess reported income and then brings up the reports containing data for the ETFs I hold. Similar with HSBC ETFs but can be a bit more work to get the data for offshore mutual funds as some fund managers have the report easily locatable on their website whereas others you have to phone up and often go through a few people to get someone who has actually heard of it and can give you the figures or report.
    • jimmo
    • By jimmo 12th May 18, 11:30 PM
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    jimmo
    • #9
    • 12th May 18, 11:30 PM
    • #9
    • 12th May 18, 11:30 PM
    You misunderstand.
    Originally posted by antrobus
    I don't believe so. Whilst the Offshore Reporting Funds report to HMRC so do banks (reporting interest) but that doesn't mean that people who submit SA Returns can omit taxable income from their Returns.
    Whilst we may be talking about relatively small amounts here, and the OP has said that no tax has been unpaid in their own particular circumstances, the fact remains that there have been omissions in their previous Returns, an absolute offence.
    The point I was trying (but clearly failed) to make is that a voluntary disclosure now, even with estimated figures and an explanation of why there are no tax consequences, would give a better chance of avoiding an Enquiry than doing nothing.
    • Keep pedalling
    • By Keep pedalling 13th May 18, 12:57 AM
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    Keep pedalling
    I don't believe so. Whilst the Offshore Reporting Funds report to HMRC so do banks (reporting interest) but that doesn't mean that people who submit SA Returns can omit taxable income from their Returns.
    Whilst we may be talking about relatively small amounts here, and the OP has said that no tax has been unpaid in their own particular circumstances, the fact remains that there have been omissions in their previous Returns, an absolute offence.
    The point I was trying (but clearly failed) to make is that a voluntary disclosure now, even with estimated figures and an explanation of why there are no tax consequences, would give a better chance of avoiding an Enquiry than doing nothing.
    Originally posted by jimmo
    I can see your point, but alll my returns have been based on the figures provided in the annual investment reports, which up to this year have not included these excess income figures, so I can only assume that they have not been provided to HMRC either. This year is different as they are contained in the report and I would think that HMRC would also have access to them, so leaving them off my returns if more likely to cause problems than leaving them off as you suggest.

    I could be wrong of cause, and I will let you know if I get pursued by HMRC at some point in the future.

    This may be an absolute offence, but as hardly anyone has ever heard of this tax, that has no specific section associated with it on the SA return, and fund managers have not provided any info on it in their tax packs to investors, it is probably one the the vast majority of investors in off shore funds have committed unless they have used an on the ball accountant to complete their returns.
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