Offshore companies owning UK property asked to certify their tax position

United KingdomScotland

HMRC have started issuing nudge letters to offshore companies owning UK property who they believe may have an outstanding liability to UK tax. Recipients are asked to complete an enclosed “certificate of tax position” (and, where a disclosure may be required, a “notice of intention”). Nudge letters are not randomly generated and should not be ignored. All recipients, even those confident of their position, should seek appropriate professional advice as soon as possible before returning these documents to HMRC or taking any further action.


HMRC have recently launched several new nudge letter campaigns on various issues, including a campaign aimed at tackling non-compliance linked to offshore corporates owning UK property. Two types of letters are being issued as part of this campaign:

  • a letter to non-resident companies owning UK property who may need to disclose either income received as a non-resident corporate landlord, or a liability to Annual Tax on Enveloped Dwellings. Recipients are also directed to tell any UK resident individuals who have an interest in the income or capital of the company to check whether their tax affairs are up to date with the Transfer of Assets Abroad anti-avoidance legislation; and
  • a letter to non-resident companies who appear to have made a disposal of UK residential property between 6 April 2015 and 5 April 2019 without filing a Non-Resident Capital Gains Tax return.

In each case, recipients are asked to consider whether they need to make a disclosure and to complete an enclosed “certificate of tax position” with one of the following responses:

  1. that the company needs to disclose outstanding UK tax liabilities (with a space for details of how any errors occurred);
  2. that the company believes it has already correctly declared the relevant tax liabilities (specifying the submission dates and references for the relevant returns); or
  3. that the company is not liable to UK tax (providing reasons).

Importantly, the certificate must be signed with a declaration that the information provided is correct and complete. If the company is making a disclosure of outstanding UK tax liabilities, a “notice of intention” must also be completed (containing information about the disclosure, the person completing the notice and the relevant company).

The nudge letter states that the completed certificate (and, where applicable, the completed notice) must be returned to HMRC within a specified time frame (typically 40 days).

Targeting taxpayers

The behavioural science of “nudge theory” has become an increasingly used weapon in HMRC’s arsenal over the last decade or so – i.e., the idea that people can be better directed towards a desired course of action through suggestion rather than obligation. Individual UK taxpayers may have noticed the same concept at work when completing their online tax returns, where certain information is now pre-populated based on figures held by HMRC (the aim being that the taxpayer will likely accept those figures by default).

Nudge letters are rarely sent at random. Whilst nudge letters do not make specific accusations and are rarely overly threatening in tone (in this case, giving recipients various options to select), the letters are generally based on actual data held by HMRC. Recipients should not be fooled into thinking this is a simple tick-box exercise. All recipients of these letters, even those confident of their tax position, should therefore seek appropriate professional advice as soon as possible.

Certificates of tax position and notices of intention

Despite the language used in the nudge letters, there is no statutory basis for either the “certificate of tax position” or “notice of intention” (which we have also seen used in other nudge letter campaigns). There is, therefore, no legal requirement to complete either document.

Certainly, neither document should be submitted to HMRC without seeking appropriate professional advice – doing so on the basis of incorrect information could lead to higher penalties being imposed or even criminal prosecution (and note there is no de minimis below which errors do not need to be disclosed). Given the serious potential implications of making a false declaration, it may be more appropriate to provide a response by way of detailed letter from your professional adviser or using an established HMRC disclosure facility.

However, it would also be inadvisable to simply ignore the letters. Failure to take action is likely to mean that there is an imminent risk of HMRC issuing an assessment or opening an investigation (either under civil procedures or, in cases of suspected fraud, using their criminal powers). If there are outstanding tax liabilities, a failure to respond will also likely lead to HMRC seeking higher penalties (potentially up to 200% of the tax due).

CMS Tax Disputes & Investigations

As part of the CMS global network with tax capability in over 70 offices, the CMS Tax Disputes & Investigations team is well-placed to advise on all forms of (direct and indirect) contentious tax matters. Our dedicated specialists have a wealth of experience guiding both individuals and corporates (across a wide range of sectors) through all aspects of tax dispute prevention, management and resolution.

Our team manages multi-jurisdictional internal investigations to identify tax errors for clients and, where applicable, make detailed disclosures in order to regularise the position (including under official disclosure facilities such as the Profit Diversion Compliance Facility, Worldwide Disclosure Facility and Contractual Disclosure Facility).