Worldwide Disclosure Facility - how to calculate amount due

[julz.ray]

Hi,

I am a UK Resident, non-dom, and just found out that I had to pay income tax on interests earned on accounts in France above 2,000£ in any year, given my status. I have to go back as far as 2012 in my disclosure and calculation of interests and wanted to make sure I have the calculation right.

At the moment, I am doing the following:
- taking any interest earned above 2,000£ in any given year
- applying my income tax rate of that year
- applying the penalty (at the moment, one-off)
- applying interests (at the moment, compounded daily from the 31st of December following the end of the tax year, as this would have been the time limit to do my self-assessment and pay any outstanding tax).

Am I missing anything/ doing it in the right order? Also, is the penalty a one-off, or compounded every year? Finally, are the interests (3% from 2009 to 2016) compounded daily or yearly?

Thanks a lot for your reply!

Julie

[AmanSood]

Hi Julz

I assume you have already done the analysis to make sure that electing to be taxed on your worldwide income on an arising basis is the most tax efficient approach. On this basis a few points to note

- Interest would apply from 31 Jan following the tax year;
- Interest rate changed to 2.75% per annum from 23 August 2016 and 3% before then. This is simple interest not compound interest
- The penalties are negotiable depending on your circumstances
- Could go back to only 2013/14 and not 2012/13 depending on your specific circumstances
- if the interest was taxed in france then you could be due a tax credit in the UK.

I'd recommend that depending on the potential UK tax at stake it would be worth getting a tax advisor to support you in your dealings with HMRC.

Hope this helps.

Aman

[julz.ray]

Hi AmanSood,

Thank you, it is very useful!

Yes I did - I am only between 2 and 800 pounds over the 2,000 pounds limit in any given year so I don't think the remittance basis would be appropriate given that I would loose my personal allowance.

For that reason as well I am hesitant to pay for a tax advisor given that the amounts are very low... Do you think it would still make sense?

I choose the option "failed to notify HMRC of a tax liability but this was not deliberate and you don't have a reasonable excuse" - I think that this is the only option that applies given that I did not submit any return (I did not think I had to because these accounts are not taxable in France - PEL, Livret A and Livret Developpement Durable).

For the interest rate, do it mean that for the year 2012 I apply 3% per annum up to 23 of August 2016 and 2.75% thereafter or 3% all across as the penalty is for 2012 ?

Thanks again for your help!

Julie

[darthblingbling]

Have you paid any tax in France on this income?

[darthblingbling]

NM, I see you mentioned that these are from tax free investments in France

[bd6759]

Note that the full amout is taxable, not just the excess over £2000,

[julz.ray]

I think it is just the amount over 2,000 pounds as I am a non-domiciled tax resident?
https://www.gov.uk/tax-foreign-income/n ... -residents
Thanks!

[AnthonyR]

I think it is just the amount over 2,000 pounds as I am a non-domiciled tax resident?
https://www.gov.uk/tax-foreign-income/n ... -residents
Thanks!

The £2,000 threshold only applies to determine whether you need to report. If it's over £2,000 and/or you brought some into the UK then you have to either:

1. Claim the Remittance basis (and potentially pay a large charge), or
2. Declare and pay tax on all of the income

As Aman said, my personal view (albeit self interested as a tax adviser) is that you should appoint a tax adviser to assist you with the disclosure. It's an area where HMRC like to see people taking things seriously and penalties can range from 0-200% (if they think you evaded tax). So getting it right is important.

[julz.ray]

Hi Anthony

Thank you for your reply,

It seems awfully "unfair" - if I earn 1,999£ in interest, then I pay nothing, but if I earn 2,001 (which I did on a year), you pay income tax on the full amount...

I take your point on taking a tax advisor - however I had quote of over 5000pounds when I actually "only" need to pay around 3,000 pounds when calculating all penalties, hence my hesitation!

Thanks again,

Julie

[panlondon1]

Hi,

how did you get on in the end and what info did you have to supply? Thank you.