If you’re an individual, trustee or director/shareholder of a non-UK company (or equivalent entities, e.g. foundations/anstalts) and directly/indirectly hold UK-situs assets, you may still have a UK tax problem even if you have never lived in the UK. Here's what to watch out for.

How can you have a UK tax filing requirement if you’re ‘offshore’?

The UK’s tax system has far-reaching tentacles so if you (in whatever capacity you are acting) have any connection to the UK, you should check the position carefully, just to make sure that you are compliant and nothing has been missed. If it turns out that there has been a mistake, it’s possible to limit your exposure to just the tax missed plus any interest (i.e. no penalties).

It’s always good to do a self-review so here are some questions you should ask yourself, whether you are an individual living abroad and dealing with your personal tax affairs, a trustee of an offshore trust, or a director (or shareholder) of a non-UK company.

What should you be thinking about?

Individuals

• Have you ever received income from UK real estate?

• Have you ever sold UK residential property since April 2015 or non-residential property since April 2019?

• Have you ever sold shares in a property rich company, such as Real Estate Investment Trusts (REITs)?

• Have you ever spent time working in the UK?

• Have you ever been UK resident while being a beneficiary of a trust you created (especially if the structure received UK income at any level)?

• Have you ever been UK resident and received anything from a non–UK trust that you did not set up?

• Have you ever been UK resident and not claimed the remittance basis for your overseas income/gains?

• Did a deceased person own or gift any UK assets, including loans, to a UK resident individual?

Trustees (or equivalent)

• Have you ever received income from UK real estate?

• Have you ever disposed of UK property or land or shares in a property rich company in the course of your duties as a trustee?

• Have you ever received income from other UK assets, including American Depositary Receipts (ADRs) or equivalent over UK investments, while a beneficiary has been UK resident?

• Have you ever held UK assets, including ADRs and loans to UK residents? If so, did you know the UK levies what is effectively a 6% ‘wealth tax’ every 10 years on such property?

• Has one (or more) of the trustees ever been resident in the UK? 

Companies

• Have you ever received income from UK real estate?

• Has the company owned or sold UK residential or commercial property since April 2013?

• Has the management and control of the company always been outside the UK?

• Has the company ever carried on a trade in the UK via a Permanent Establishment?

What else should you be aware of?

Since 6 April 2017, the UK’s inheritance tax regime has considerably widened in scope, so be very careful where you (in any of the three capacities above) hold an interest in UK residential property, either directly or indirectly. This includes a loan to anyone who spends the money on UK residential property in any way as well as any collateral that you provide to facilitate any such loans. A recent example saw an overall charge of 120% of the property value so proper planning is key.

How can you protect yourself? 

If you are entirely confident that you have complied with all your UK tax-reporting obligations, you do not need to worry. However, if you are at all uncertain, then you should seek advice from our qualified team of UK tax experts who can review your position and let you know where you stand.

We can assist you with bringing your tax affairs up to date, ensuring that you are compliant with HMRC. With our experience of working with international clients, we can advise you on how best to structure the ownership of your assets to maintain your wealth for the next generation.