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Taxpayers should take care if asked to sign a Certificate of Tax Position

Taxpayers should take care if asked to sign a Certificate of Tax Position

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As a result of the information received by HM Revenue & Customs (HMRC) from around the world under the Common Reporting Standard (CRS), taxpayers are being challenged over possible undeclared income and gains from offshore assets.  Taxpayers should take care and not to just sign the enclosed Certificate of Tax Position without having taken specialist advice.

What is a Certificate of tax position?

This is a form created by HMRC and has no statutory basis behind it.  In turn this means the taxpayer does not have to respond in any way.

HMRC send this Certificate with a covering letter giving the taxpayer 30 days to respond.  The covering letter starts by with “We have information that shows you may have received overseas income or gains that you have to pay tax on”.  Neither the letter nor the Certificate refers to any particular tax year.  Nor does it state what HMRC believe to be missing or incorrectly stated.

Such information has come from the exchange of information by countries under the Common Reporting Standard.

What is CRS?

The CRS calls on 143 different countries around the world to obtain information from their financial institutions and automatically exchange that information with other countries.  This is being done on an annual basis.

What information is being shared?

CRS sets out the financial account information to be exchanged and the financial institutions required to report.  For example, each country will report on all account balances as at 31 December each year.  This includes all forms of bank accounts including accounts held by third parties such as solicitors and stockbrokers on behalf of taxpayers etc.

Why should taxpayers be worried?

As previously stated, the Certificate of Tax Position has no statutory basis and therefore HMRC cannot force a taxpayer to complete it or sign it let alone penalise them for not doing so.  To do so puts the taxpayer in a position such that HMRC may be able to demonstrate that the taxpayer’s behaviour may be deliberate (as opposed to careless) in terms of civil penalties.  Worse still, it may provide further grounds for prosecution.

What should taxpayers do?

Seek specialist advice.

I can be contacted at pmalin@hwca.com or Andy at amaxfield@hwca.com.

If you cannot find the information you need on our website, please contact Paul Malin or Andy Maxfield using our contact form or email directly to pmalin@hwca.com or amaxfield@hwca.com

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