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Offshore property ownership HMRC enquiries

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Heads up! It would appear that HMRC are extending their approach to obtaining information. Therefore, tenants and owners of properties owned offshore should be aware of this.

What is happening? 

We have seen a number of cases where tenants of UK properties, which HMRC believe to be owned by overseas companies or trusts, have received letters from HMRC directly asking for specific information.  We understand from contacts and the industry press that these are not isolated. 

What is the purpose? 

The letters are phrased to inform the tenant that in some circumstances tenants need to deduct tax from rent paid and settle this with HMRC.  Essentially the letters are structured with the proposed aim of ‘helping’ the tenant understand this and ensure they are complying with these rules correctly.

What is the concern? 

The information that HMRC are requesting is quite extensive and wide-ranging in respect of both the tenant and the owner including: 

  • The full name and previous names of the occupier, national insurance numbers, UTR’s, UK tax status, date of birth etc 
  • Date moved in and who rent is paid to 
  • Any connection to the owner 
  • If property is owned by a trust – details of the trust, trustees, etc copies of the trust deed if available 

This information therefore has much wider potential implications than simply whether income tax should be deducted. For example it could impact the owners inheritance tax, capital gains tax or ATED position


Does the tenant need to provide the requested information? 

The letters are not issued by HMRC within any enquiry and do not constitute information notices so  HMRC is essentially asking the tenants to provide voluntary assistance. 

It is not known the approach HMRC will take if letters are not responded to although they have a wider range of investigatory powers they could use if they wish including potentially opening enquiries into the tax affairs of the tenant, suspected owner, or pursing information notices. 

Whilst therefore it is not compulsory to respond and the approach in each case should be considered carefully on its own facts, in most cases it is likely to be more beneficial in the long run for the tenant to make some response to HMRC rather than simply ignore the letter.    

What should you do? 

Tenants

If you are an occupier of a property that you believe is owned offshore whether you have received a letter yet or not we would advise that you seek professional advice to confirm that you are compliant with your tax responsibilities and any other areas where information being requested by HMRC may impact your tax position.  If a letter has been received the professional advisors can assist with how best to respond to HMRC and seek confirmation from them if there is any uncertainty. 

Owner

If you are an offshore owner of UK property we suggest that you consider reviewing your UK tax affairs to ensure that you are fully compliant with the current tax rules. If you are unsure about any aspect seek professional advice. On this basis therefore if HMRC do request information from your tenant no unforeseen implications should arise. 

If you are concerned about the above please speak to your local Menzies advisor or contact.

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