Client advised that her father died in India a while back & it took ages to sort out his affairs. She has now had an interest earning account in India for 5 years and hasn't put the interest on her tax return. She is happy to disclose & said she never dealt with it before as she had a major struggle to get any paperwork out of the indian banks. Now got the detail & she has been taxed in India at 30% which I think can be offset but pays 40% in the UK. Total tax difference due & undisclosed is about £130. This seems a small amount and I am wondering if I just put it on the current tax return and put a note in the white space. If HMRC want to make a song & dance about it & charge 100% penalty it is not going to break the bank. Alternatively should I disclose in a separate letter to make it clear that this is a full disclosure.
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Even though she has been taxed at 30% in India, she can only claim tax credit relief of 15% since that is the maximum allowed by article 12 of the DTT. How does this affect the figures?
Assuming your client is a non-dom and the income was not remitted to the UK there is no UK tax payable at all as the income was below £2,000 each year.
Are you certain about domicile?
Thanks, but my client is resident in all ways in the UK.
Residence is largely unrelated to domicile. As the father died in India it is quite likely that the client has a domicile of origin in India.
Personally, I'd include this year's income in this year's return and write a letter to HMRC with full disclosure of the earlier years along with a cheque to cover the additional tax payable for those years. They may decide to add interest but they may just accept it as is.
If you do this...
...perhaps consider calculating the interest arising and get the client to give you a cheque to forward at the same time for tax and interest due, but no penalty, on a full disclosure / relatively minor tax involved position.Thanks for the various updates. I don't deal regularly with overseas matters but do know that, as David Treitel says, my client did have a domicile of origin in India but her domicile of choice has been UK for decades & definitely no plans to change that. My feeling was to do as Tim Vane suggests - it has been suggested that I phone the HMRC voluntary disclosure phone line but think the written route will be easier.