WellTax Blog

Europeans targeted by British tax authorities: Penalties and fines for undisclosed foreign income

June 15, 2021

For some years now, HMRC, the British tax agency, has targeted Europeans residing in the UK who receive other incomes outside the UK.

Thousands of Europeans have received a communication from HMRC in which they have been informed that HMRC has evidence that a UK resident has received or continues to receive foreign incomes or earnings, on which he/she is required to pay taxes in the UK.

In most cases, those who have received the so-called “nudge letter”, which translated means a push letter (to declare), are Europeans residing in the United Kingdom, owners of a property in a European country regularly rented and on which they pay taxes through their country’s tax return.

Reporting income in the country where other income is received is not enough: UK laws require that anyone residing in the UK must declare any income earned globally.

The letter mentions the so-called “Worldwide Disclosure Facility”, which is an electronic procedure by which any UK resident is required to declare their foreign income, previously not disclosed. Income will not be taxed twice: in fact, according to the various bilateral treaties with the United Kingdom to avoid double taxation, the taxes applied and already paid in the country of origin, can be deducted in the British tax return.

The control of the foreign incomes of its residents is only the beginning of the cooperation process between banks and countries to which we have been assisting in recent years.

Banks that in the past were reluctant to provide information about their customers to various countries, today, due to the CRS (Common Reporting Standard) of the OECD (the international body that brings together all developed countries), are obliged to provide the tax authorities of the state in which the citizen resides with his/her bank details.

In this case, a citizen of any European country residing in the United Kingdom, who receives income from the rental of a property in the country of origin on the foreign bank account, has very likely received a “nudge letter” from HMRC and is therefore required to declare their foreign income not only in the country of origin but also in their UK tax return.

Upon receipt of the letter, you have 90 days to respond, choosing the method by which you wish to declare the previously undeclared income.

Given the complexity of the procedure and the ease with which calculation errors can occur, it is recommended to seek the assistance of an accountant to be able to carry out the tax obligations. The time for sending and receiving a response from HMRC through the Worldwide Disclosure Facility is quite long: it ranges from 90 to 180 days in total, so it is advisable to act promptly.  



Domenico Santomasi

Photo by Mark Tegethoff on Unsplash

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