Ordinary individuals inheriting assets from overseas could risk criminal charges if they miscalculate the tax owed, reports The Telegraph.
New legislation is being introduced in the New Year which means that beneficiaries who inherit offshore money could see their income wiped out completely due to new penalties and punishments. The clampdown is part of HMRC’s latest attempt to close a ‘tax gap’ reported to be worth £34bn per year.
A loophole in the law meant that anyone owing UK tax for income earned abroad could come forward without fear of criminal charges or paying punitive penalties. However, the so-called ‘Liechtenstein Disclosure Facility’ (LDF) will end on December 31 2015 and means that HMRC can now impose penalties of at least 30% of the tax due and can investigate cases going back 20 years, in contrast to the current limit of 16 years.
In addition, the larger financial sanctions will be compounded by the fact that anyone miscalculating overseas taxes could be branded as a criminal. This position was confirmed in the Chancellor’s Autumn Statement.
“This won’t just affect serial evaders but ordinary people who make a mistake with their tax or bury their heads in the sand”, said John Cassidy, a tax investigations partner at Crowe Clarke Whitehall. “After the amnesty ends HMRC will become more vigilant and less sympathetic.”
It is reported that tens of thousands of Britons underpay tax on offshore assets each year. However, this is often due to a lack of understanding, as in the case of a 92 year old woman who discovered that the Swiss bank account she inherited from her late husband was liable for back taxes. As she was a joint holder of the account, she would be branded a criminal under the new laws.
Andrea Pierce, Director of Legal Services at Kings Court Trust, commented: “Dealing with the tax implications of an estate can be a complicated process even if overseas assets aren’t involved. Many people think that they have enough knowledge and experience to deal with the estate but often end up requiring professional assistance at some stage in the process. Executors are financially and legally responsible for the distributions that are made, so you have to be 100% confident that you know what needs to be done; otherwise there could be a nasty shock waiting after the estate has been distributed.”
Kings Court Trust’s specialist tax team can handle any Inheritance Tax work as part of our comprehensive estate administration service, saving time and hassle for the family. For more information call 0300 303 9000 to speak to a member of our client services team.