London accountancy firm Grunberg & Co has cautioned UK-based individuals with overseas assets as HM Revenue & Customs (HMRC) scrutinises the tax affairs of wealthy individuals.

Part of a crackdown with an estimated £60 million value, HMRC has put in over 2,300 requests for taxpayer information – a record 26 per cent of which were made to foreign tax authorities.

This, the firm warns, is a sign that those with overseas assets must tread carefully.

“The focus is now on UK-resident individuals with overseas assets,” said Nimesh Patel, Tax Partner at Grunberg & Co.

“Quite often, individuals will have accumulated offshore assets under various structures before moving to the UK.

“Individuals residing outside the UK but planning to move to the UK must take UK tax advice as soon as possible, and ideally before becoming UK-resident, so they do not encounter unexpected tax liabilities.

“Individuals already residing in the UK should also take tax advice on their overseas assets. Many individuals mistakenly believe these assets are outside the scope of UK tax and tax on these assets is only payable where the asset is situated.”

International information

The firm recognised the concern that this raises for asset owners who may find themselves subject to additional investigation, offering a message to taxpayers of what they might expect in terms of collaboration between tax authorities.

“The information-sharing agreements are impacting where individuals are choosing to hold assets which in turn may impact where these individuals move to after leaving the UK,” said Nimesh.

“It is common for tax authorities to exchange information on the type of income generated through assets and bank accounts, and account balance and interest details are often shared.

“Due to a high volume of information being exchanged, it is common for the information to be misleading or inaccurate, so it’s best for the taxpayer to obtain information themselves and compare it to the information being shared so they do not end up overpaying tax.

“Nudge letters are being sent out which invite the taxpayer to confirm they have declared income and gains from overseas assets. Although this is not a request for evidence, it usually prompts the taxpayer to check their records so that everything that should have been declared has been.

“If the taxpayer realises that there are sources of income or gains that should have been reported, they have the option to make a disclosure to HMRC.”

However, cautioned the firm, individuals may favour moving to countries where there is less information being shared.

These countries tend to be tax havens where financial information is kept confidential.

The burden of growing scrutiny

The ongoing crackdown by HMRC has been compounded, in the firm’s view, by recent changes to UK tax legislation which has made holding offshore assets substantially less beneficial.

Nimesh concluded: “The key change that has affected non-UK domiciled individuals is the concept of being deemed UK-domiciled after being a UK resident for at least 15 out of the previous 20 tax years. There are also the proposed changes expected to take place on 6 April 2025 which will include the abolition of the remittance basis and the removal of the tax advantages of being non-UK domiciled.

“It means they are within the scope of UK tax on worldwide assets, which significantly increases their tax liability each year – as well as putting their worldwide assets within the scope of UK inheritance tax.

“There are many individuals that have left the UK to mitigate the impact of these changes – and we’re not at the end of the tunnel yet!”

Contact Grunberg & Co for further advice on held assets and tax planning.