Worldwide Disclosure & Exchange of Tax Information with Overseas Tax Authorities
Most OECD countries have now joined together in a worldwide exchange of information system. This requires banks and other financial institutions to provide details of accounts they hold for individuals outside their country. The system already applies to Crown dependencies, such as the Channel Islands.
For example – if a UK resident has a bank account in Spain, the Spanish bank will tell the Spanish tax authorities the details of the account, including the balance held at 31 December each year. The Spanish tax authorities will tell HMRC. HMRC will then be able to see whether that individual has declared any overseas bank interest on the Foreign pages of the tax returns.
You may receive a letter from your UK banks asking you to confirm you are UK resident, or if not, where you are resident. This is so they can fulfil their reporting requirements. The bank will not take any further action once you have confirmed you are UK resident.
If you have offshore assets and have not reported the income to HMRC, it is imperative that you take action now. HMRC has launched a “Worldwide Disclosure Facility” to make disclosures. There are no “carrots” or incentives to make an early disclosure.