The Times has recently reported on leaked data which shows approximately 17,000 British citizens owned approximately 22,000 properties in Dubai as of spring 2022, and yet only 1,900 UK tax residents reported let property income from a Dubai property in the 2021/22 tax year. It is expected that most of these property owners will have let their property rather than retaining them solely for their personal use, meaning very few will have had no tax reporting requirements in the UK. If you own property in Dubai and you are or have been UK resident, you should consider if you need to make a disclosure to HMRC.
Who needs to disclose let property income to HMRC?
If you are or have been UK tax resident and you own or have owned let property anywhere whether in the UK, Dubai or another offshore territory, you should disclose the let property income and profits to HMRC if you have not already done so, unless you are non-UK domiciled and were or are taxed on the remittance basis (which is expected to only be available until April 2025). Using one of HMRC’s disclosure facilities, any historic UK tax liabilities should be declared for the period that you have been UK resident subject to the time limits that HMRC can assess.
If you have never filed UK tax returns before, then on top of any historic disclosure, you would also need to register for self assessment and continue to file UK tax returns for as long as you receive the let property income.
Similarly, if you have owned a second property in Dubai and disposed of it for a profit, you would need to declare the capital gains tax liability to HMRC.
Do HMRC know if I own property in Dubai?
There is no public register of owners of property in Dubai, and it is not always easy to find out who owns the property in question. However, the United Arab Emirates continue to be a participating jurisdiction for CRS purposes and it should not be relied upon that HMRC will not eventually find out if you have undisclosed let property income.
The longer you wait to come forward and disclose any UK tax liabilities, the higher the financial penalties and late payment interest charges will be. Additionally, penalties are higher where HMRC ‘prompt’ you to make a disclosure and in the most extreme cases HMRC could consider a criminal prosecution if the error or omission was deemed to be “deliberate”.
What are the consequences of not disclosing tax liabilities to HMRC?
If an individual waits for HMRC to find them, then they can expect to have an enquiry opened into their tax affairs. The downsides of adopting a “wait and see” approach include:
- Not retaining control over the enquiry and facing uncertainty that can last many months or years;
- Higher financial penalties for not taking the opportunity to make an unprompted disclosure to HMRC;
- The risk that HMRC will start focusing on other aspects of your tax affairs, even if there are no other issues.
How do I make a disclosure?
If you have neglected to disclose let property income from your property in Dubai to HMRC, then a disclosure can be made using HMRC’s Worldwide Disclosure Facility (WDF), specifically available to disclose offshore income and gains.
If the behaviour that gave rise to the loss of tax was deliberate, then HMRC’s Contractual Disclosure Facility (also known as Code of Practice 9 or COP9) should be considered instead, as this is the only mechanism available to give an individual immunity from criminal prosecution.
If undisclosed property income is just one of a number of matters that require disclosure, then the best course of action is to speak to an adviser with experience in tax disclosure work so they can explain what the best course of action is.
If you have any questions relating to property income, offshore income and gains, or HMRC’s disclosure facilities, contact Menzies’ Tax Disputes and Disclosures team on the hotline below:
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