The UK Revenue and Customs Service
Customs Service have announced a general
amnesty for UK residents who have foreign
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
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
Recent treaties permit the
exchange of information between foreign
states which certainly include Britain,
Spain and France.
Rush to beat tax amnesty deadline -
"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
"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
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).
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.
Do you have comments or content that
could be added to this article?
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.
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How do I take advantage of the
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
Nevertheless, you may still be able to
employ an accountant to make your disclosure
within the terms and condition of the
All the details are with my accountant
in Spain and I cannot get there until
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.
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.