Certificate of Tax Position – Nudge Letters

Certificate of Tax Position

In recent months, HMRC has issued ‘nudge letters’ to UK individuals with potential tax liabilities on overseas income and gains.

Following the receipt of financial information under the Common Reporting Standard (CRS), HMRC has issued letters to these individuals stating that information now in HMRC’s possession indicates that they may have received foreign income and/or gains which could be taxable in the UK.

“We have information which shows that you may have received overseas income or gains which is taxable in the UK,” the letters say. “We have received this information through the UK’s tax information exchange agreements with other countries. It is your responsibility to tell us about your UK tax liabilities from offshore income or gains anywhere in the world.”

Attached to the letters is a ‘Certificate of Tax Position’. This instructs individuals to sign a statement that either their tax affairs need to be brought up to date through the Worldwide Disclosure Facility (WDF), or they have declared all their income and gains.

Worldwide Disclosure Facility (WDF)

The Worldwide Disclosure Facility (WDF) allows those with undisclosed offshore money, gains, investments or assets to settle and regularise their tax affairs with HMRC, but unlike other voluntary disclosure arrangements, will offer no favourable terms or lower penalties.

Common Reporting Standard

The Common Reporting Standard (CRS) is an international agreement involving the UK and over 100 countries including countries in the European Union, China, India, Hong Kong and Russia. It allows for the exchange of information between jurisdictions about financial accounts and investments to help stop tax evasion.

Overseas financial institutions, for example, banks, insurance companies, investment companies, will provide information on UK residents with financial accounts and investments outside the UK which will be passed to HMRC.