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The Problem

The taxpayer had been receiving dividends on a US shareholding for several years. The taxpayer had only reported some of the dividends on their tax returns, and in some years, had not reported any dividends at all.

As the taxpayer was UK resident during these years, they were subject to UK tax on their worldwide income. HMRC had received information from the USA confirming that the taxpayer had income that was subject to tax in the USA, and so contacted the taxpayer to bring their tax affairs up to date.

The Solution

We assessed our client’s circumstances regarding their failure to report the dividend income and determined that the disclosure should cover 6 years.

We then registered the taxpayer under the online Digital Disclosure Service and prepared comparative calculations for the relevant years detailing the income/tax that was reported and paid, compared with the income and tax was actually due in light of the unreported US dividends, taking into account any double taxation relief in line with the UK/USA Double Taxation Treaty.

Once the additional tax was confirmed, we calculated the late-payment interest due, and calculated the relevant penalties based on the time taken to disclose, the taxpayer’s behaviour, and the fact that the disclosure was prompted by HMRC. These calculations formed the basis of the disclosure.

After the figures were agreed, we prepared an amended tax return for the most recent tax year and a disclosure was made through the online Digital Disclosure Facility in respect of the previous tax years.

The Result

The taxpayer was able to bring their tax affairs up to date, and by making a full and prompt disclosure, was able to minimise any interest and penalties due.

We were also able to incorporate a claim for overpayment relief for one of the years into the disclosure offer, which further reduced the overall amount payable.