Offshore Property Developers – What’s the Issue?
George Osborne (remember him) in his final Budget announced the creation of a H M Revenue & Customs (HMRC) Task Force focussing on Offshore Property Developers.
The Task Force appears to be very much alive and starting to ask questions.
PE or not PE, that is the question
HMRC’s initial interest in Offshore Property Developers appears to be whether a permanent establishment (PE) has been created in the UK.
The implication of creating a PE, intentionally or not, is that it would bring the activity within the scope of UK taxes.
A lot of press comment has been made recent regarding rates of corporation tax but the Task Force is an example of HMRC looking to bring more taxpayers within the tax fold.
Corporates, directors, CSP’s; send us your taxes
The Task Force’s remit is to investigate developers who have undertaken property developments in the UK. Potentially over the last 20 years.
The aim of the Task Force is to ensure that taxes have been properly declared and paid in the UK.
Further, the Task Force will undoubtedly become involved in policing new trades or development of UK land by offshore property developers as a result of the July 2016 changes.
What taxes are involved?
Corporation Tax, VAT, PAYE/NIC, SDLT, Diverted Profits Tax.
What are the information sources?
Land Registry, the internet, town hall planning departments, offshore jurisdictions, tax returns, etc
All the sources of information will be “whizzed” through HMRC’s Connect software to enable a fact pattern upon which tax challenges can be based.
What about Corporate Service Providers (CSP’s)?
CSP’s also need to be mindful of the Task Force as they may be administering structures through with property development has arisen.
The CSP may have no direct involvement in the property development but nevertheless could be faced with questions about it.
Non-Resident Landlord Returns and ATED may be the responsibility of the CSP, rather than the developer, and that could bring the CSP more directly into HMRC’s sphere of interest..
Are there any other issues to consider?
HMRC has a very firm gaze on property and property development.
Any interest from HMRC needs to be dealt with appropriately, wishing it away will not make it go away.
The costs of not treating such matters seriously can be punitive.
If you wish to discuss a matter involving the Offshore Property Developers Task Force , please contact me at firstname.lastname@example.org or Paul at email@example.com.