Amnesty for UK Taxpayers. The UK Revenue and Customs Service Customs Service have announced a general amnesty for UK residents who have foreign assets. The amnesty originally only applied to interest from savings held in offshore bank accounts but was extended to include income from property abroad. Some, but not all, taxpayers were informed by letter from the bank but generally the RCS has relied on the press to publicise the Amnesty. It is estimated that at least 300,000 UK residents own second homes, mainly in Spain and France and around 50% of these earn income from renting. The RCS has promised to restrict penalties to 10% of the undeclared tax. However, the obvious risk is that they may well look into how the capital was generated to acquire the second home and this could result in a full investigation into the suspected offenders tax affairs. The amnesty expires in June 2007. After this date RCS is planning a thorough investigation. Recent treaties permit the exchange of information between foreign states which certainly include Britain, Spain and France.

Rush to beat tax amnesty deadline -  business.timesonline.co.uk "The UK Revenue and Customs Service announced a general amnesty in April 2007 for UK residents with foreign assets, including second homes." "AT LEAST 40,000 individuals with offshore savings could face a Revenue & Customs investigation after failing to take advantage of its tax amnesty, which ended at midnight on Friday." "The Revenue said it knew of about 100,000 people who have not declared and paid tax on their offshore assets, but only 60,000 had come forward." "The remaining 40,000 now face a tax probe and penalties of up to 100% of the tax they owe, compared with up to 10% had they taken advantage of the amnesty." "The Revenue obtained details of 400,000 offshore accounts from UK high-street banks, after they lost a legal battle to maintain their customers’ confidentiality." Tax Amnesty - Read the Full Article "The amnesty was expected to apply only to savers with bank accounts in offshore centres..." "...at the last minute it has been quietly extended to people who own second homes abroad." How the Tax Amnesty Relates to Property Owners - Read the Article

Of particular interest to Spanish property owners resident in UK. There is an obligation in Spain to declare and pay a tax of 24% of the gross rental income. No deductions are permitted except services (when not included with the rental) and agency commission (depends on the actual contract). There is an obligation in UK to declare income generated by overseas assets, irrespective of where income is paid. The tax is based on net income after deduction of expenses and any foreign tax deducted to reduce the UK tax amount. The obvious risk for owners who let and don't declare any income is detection from their own advertising. In order to take advantage of the amnesty and disclose undeclared income the UK resident has until November 26th to file the declaration and provide details of taxes already paid and this could impose certain difficulties - The Timescale could be difficult because all the documents are in Spain. Declarations might never have been made and the problem here is that the full tax would have to be paid in the UK (without deductions for the Spanish tax). There is also the risk of subsequent detection by the Spanish authorities and another lot of tax would have to be paid with no chance of double taxation relief.

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The only logical procedure, if declarations have not been made in Spain, is to first to make a disclosure in Spain and then in UK. Anyone who needs confidential help or advice in this respect should click on the comments box below. Any questions can be raised anonymously (if required) and we will publish replies in a Forum.

How do I take advantage of the amnesty?

You only had until June 22 to register your intentions with the RSC. After this you have until November 26 to submit the declaration and pay the tax due.
You will still be fined and perhaps have to pay interest for failing to declare the income but the RCS has promised that the fine will be no more than 10% of the undeclared tax, even though it has the power to impose fines of up to 100%.

What happens if I make the disclosure after June 22nd?

Quite possibly you could plead that you were unaware of the amnesty, particularly if you were not informed by the CRS or your bank.
Nevertheless, you may still be able to employ an accountant to make your disclosure within the terms and condition of the amnesty.

All the details are with my accountant in Spain and I cannot get there until October!

June 22nd 2007 was the agreed time-limit to file notice of disclosure. The actual disclosure had to be completed by November 26.
If you file now your accountant should be able to gain extra time, especially if your affairs are complicated and you have owned the property for a number of years.

I have made declarations honestly and paid taxes on my rentals in Spain. Why should I have to declare and pay in the UK? I will be paying twice!

UK residents have an obligation to declare and pay tax on their worldwide income. You should not be taxed twice as double-taxation treaties exist.
Tax on income from overseas assets is calculated and any foreign tax deducted from your tax liability. This applies in most European countries.
In many cases there is little or no tax to pay. In Spain, for example, the tax is a flat-rate 24% of the gross. In the UK deductions are permitted (repairs, maintenance, utilities, advertising etc) before arriving at the "net before tax" amount, which is taxed at the contributors normal rate.
Very often the figure is negative.

The actual details can be quite complicated. You should study the Direct.gov.uk page on overseas assets or, if you cannot manage your self-declaration, consult a qualified account with experience in overseas assets.

If I make a clean breast of it will the CRS leave me alone?

Not necessarily! For example they might question where the cash came from in the first place and start an investigation. If they suspect that you have been fiddling they could go back 20 years.

Related Links about the CRS Amnesty from Business.Timesonline.co.uk/

Rush to beat tax amnesty deadline
At least 40,000 people with offshore savings could face a Revenue & Customs investigation
Your guide to the Revenue amnesty
Although the amnesty is aimed at about 3m people with offshore accounts, all taxpayers can benefit.
Savers have only days to come clean
The taxman has sent letters to 200,000 offshore account holders warning of June 22 deadline on its offshore tax amnesty.
What should you do now?