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 31st July 2010
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Tax ‘amnesty’ for overseas owners The tax authorities are offering a so-called ‘amnesty’ for UK residents who have not yet declared income from overseas bank accounts – including rental from property abroad. HM Revenues & Customs have launched what they term an Offshore Disclosure Facility under which UK tax residents have until 22 June 2007 to inform the authorities that they intend to make a declaration about overseas income. To meet that deadline, the taxpayer simply has to give notice of their intent to declare - the detailed disclosure itself does not have to be made until 26 November 2007. Though the Offshore Disclosure Facility is described by some as an amnesty, in fact it is not. Under its terms, all back taxes still have to be paid in full, and no one is immune from prosecution. Escape However, if the overseas income is declared and repaid in full - with interest - then the taxpayer will 'escape' with a financial penalty of just ten per cent of the tax that was due – instead of the usual penalty which is up to 100 per cent of the tax owed. There are limitations even here; if a person had previously signed a full tax disclosure to the UK tax authorise which - under this new disclosure facility - turns out to have been false, then the ‘amnesty’ does not apply and they may face the full penalties. The disclosure facility follows a ground-breaking court case during which the HMRC realised there were many more undeclared offshore accounts earning income than they had realised. Some have suggested the number of undeclared accounts could run into thousands or even tens of thousands. Second home The disclosure rules apply to all UK tax residents who have any form of income from overseas. In the case of France this will usually be a second home or investment property that is being rented out. This income has to be declared to the UK tax authorities no matter how small the sums involved. Anyone who simply has a French bank account to help with payments on their second home - for example the phone bill or heating - will not have to declare anything as long as they are not receiving any income either from that property or any other source. Any interest earned on money in a French account – however small - should also be declared Disclosure can be made by telephone, in writing – or online. David Franks, chief executive of tax specialists Blevins Franks, says the overseas income disclosure rules can catch people unawares. ‘UK residents often don't realise that if they have income from outside the UK (or make gains on non-UK assets), it is generally taxable in the UK and should be declared here whether or not the money is ever brought into the UK,’ he said. Seek advice ‘The only exception to this is for certain individuals who are not “domiciled” in the UK, and these will generally only be those born outside the UK who have no intention of remaining here permanently; and even then, if the income is brought into the UK in any way, it will be taxable in the UK.’ He added: ‘Those who are concerned about their domicile status should seek advice now, before the disclosure notification period expires.’ However, UK residents who let out their properties in France not only have to declare their tax in the UK – but in France too. ‘Each country will calculate the taxable income under its own rules, and any tax paid in France can be offset against the UK liability on the same income,’ said David Franks. See also: What happens to your UK investments if you move to France? HM Revenue and Customs Tax Zone Home Page Looking for a property in France? Use FrenchEntrée's Property Finders to help you find your property and to help you through the buying process 
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