Certificate Of Tax Position- What does it mean & Is it important to India based UK residents also ?

Last to last year, HMRC came up with a Voluntary disclosure scheme, known as Digital Disclosure Service (DDS). Accordingly, HMRC asked UK tax residents including overseas expats (for ex., India expats) who are residents in UK to voluntarily disclose their income & assets including their Offshore income & assets, if the same is not declared or inadequately declared in the previous income tax returns filed. HMRC made it clear that it doesn’t bother whether the undisclosed income & assets including Assessee’s Offshore income & Assets were not declared knowingly or un-knowingly all these days. But, UK authorities termed this voluntary disclosure scheme as a last chance for the tax assessee’s to disclose all their hidden & missed assets , pay the pending taxes to settle the transactions clear.

As per the Digital Disclosure Service (DDS) scheme, the disclosure should be made within 90 days from the date of notification acknowledgement i.e. Before the deadline of 30th, September 2018. As per DDS, the tax resident can tell HMRC that he/she/company etc., has not declared the right amount of one or more of the following sources of income:

Ø Income tax

Ø Capital Gain Tax

Ø National Insurance Contributions

Ø Corporation Tax

It is important to be noted that , HMRC warned of stringent legal action on those failing to disclose the undisclosed assets & income or failing to pay the right amount of tax within the stipulated deadline& warned they will face penalty which is a percentage of the additional amount One owe’s. According to the sources, penalties can go upto:

Ø 100% of the tax liability if the income or gain arose in the UK

Ø 200% for an Offshore liability.

Ø Criminal Prosecution if the offence is grave

Now, what is meant by ‘Certificate of Tax position’?

Following the last year 90 days (30th September 2018) voluntary disclosure deadline from the date of notification acknowledgement, good number of tax payers started receiving a letters known as ‘Certificate of Tax Position’ in the current month.

This letter is issued by HMRC- Risk & Intelligence Service division. The Certificate of Tax position is issued to both individuals & company with undisclosed Offshore Assets & Offshore Income. It is said the letter clearly states to the tax payer with undisclosed Offshore Income & Assets, that HMRC have specific & accurate details about the so & so tax payer’s undisclosed Offshore assets & income. Also, the Certificate asks the assessee to tell HMRC of any tax liabilities that was not declared before.

It is to be noted that the letter gives taxpayer, the deadline to sign the Certificate of Tax Position by giving the following similar kind of options to choose from as declarations. The tax payer has to choose one of the three the following similar kind of options as declaration in the letter received. It is said the tax payer has to sign the Certificate & even he/she has no idea about the details that HMRC might have already procured about the so & so tax tax-payer’s Offshore Income & Assets.

Ø Either tax payer has to acknowledge that he/she got Offshore Assets & the same would like to be declared & taxes be paid via worldwide tax disclosure scheme.

Ø Or the tax payer has to declare making it clear that he/she has no offshore assets & no tax due owe towards HMRC.

Ø Or, the tax payer has to declare that he has declared all his/her offshore income & Asset & no additional tax due owe towards HMRC.

Tax experts warned the Individuals & companies who received the certificate before signing the same. Because false & inaccurate information results penalty up to 200% on Offshore tax liability & even it results in criminal prosecution if the tax offence is so grave. It is said HMRC got reliable information from the offshore countries about the taxpayers Offshore Assets. UK Government is receiving details about offshore assets of his taxpayers from more than 100 countries via UK’s Tax Information Exchange Agreements. UK signed Tax Information Exchange Agreements with more than 100 countries including Switzerland, India, Panama etc., So UK tax authorities are regularly receiving the most reliable & accurate offshore asset’s details of its tax payers from Offshore countries. The authorities in the Offshore destination banks & Offshore tax authorities do not need to inform its account holders for sharing their income & asset details with UK as per the International Information Exchange Agreements.

Why it is important to India based UK residents?

There are good number of PIO’s & OCI’s resident in the United Kingdom. Most of them are working as professionals in different sectors & many are running Company & LLP’s. It is common that most of them got taxable income & Assets in India. Many believe since they are paying taxes in India for the income generated here, the same is not required to be declared in UK. Even most of the assets held in India is generally forgotten or ignored to be declared in the resident country. But, this can be resulted in receiving letter like, Certificate of Tax Position that leads to severe headache. It should be noted that, Even India signed International Agreement with the United Kingdom related to Tax Information Exchange mutually.

It is advisable to take professional tax advice from the authorized tax professional or direct HMRC helpline numbers can be contacted . Below HMRC Helpline numbers can be contacted:

03001231078

+443001231078(outside UK)

Let us know if we can connect the needy with the right UK tax professional.

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