Include Outsourcing In Your 2023 Budget Forecasts To Ensure Accurate Offshore Investment Reporting

Take the pain and strain out of collecting offshore reporting fund data for offshore investment and excess reportable income (ERI) tax treatment.

Did you know that investigations by HMRC’s offshore unit increased eight-fold between 2016/17 and 2019/20?

With many investors now having offshore financial interests, HMRC’s specialist team is ramping up its efforts to clamp down on offshore tax evasion and tax return errors.

Data from our recent Freedom of Information request shows that HMRC’s Offshore, Corporate and Wealthy unit has achieved a total yield of £971m from its cases between 2018/19 and 2019/2020. This is in addition to a yield of more than £12bn by its Fraud Investigation Service.

HMRC renewed its “No Safe Havens” offshore strategy in 2019, with punitive penalties for errors in offshore data within tax returns. It is important to correctly identify whether offshore funds are reporting or non-reporting as there are differences in the application of tax treatments. With capital gains tax being applied to reporting funds and income tax being applied to non-reporting funds, the incorrect identification of offshore funds could lead to higher tax bills for your clients and potential fines from HMRC.

As you know, every British taxpayer with investments in offshore funds is legally required to report their tax liability to HMRC. Accountants are required to ensure their clients’ returns are accurate based on the information provided by clients and their financial institutions. Therefore, there is a need to make certain you have all the data required to complete the return for your client. FSL is acutely aware of the effort taken to locate accurate data on clients’ offshore financial interests. It takes many organisations a large number of working hours to go through each client’s multiple investment portfolios to understand the tax treatment of each type of holding. Data is not always available from the client’s investment managers and could be incomplete or inaccurate from HMRC’s Reporting Fund list. Or if your client has several investment managers, data provided could be inconsistent, in different formats or out of date. It is common that Excess Reportable Income (ERI) is missed from financial institution tax reports or could be incorrect. You have to spend time collating and correcting the data received and trying to source data to fill in any gaps. The entire process is a duplication of effort that could be better spent adding value to the service offered to your clients.

Many organisations such as yours are currently going through the annual process of setting budgets for the coming year, so this is a great time to consider your need for offshore reporting fund data for accurate excess reportable income (ERI) tax treatment.

Outsourcing the process would leave you and your staff free to focus on your clients. It will reduce the impact on your teams as identifying funds and determining tax liabilities is time-consuming and labour-intensive. FSL’s dedicated Data Analysis Team can support data queries and give you confidence in your reporting. We help you deliver accurate information from multiple sources through our proprietary database of fund managers (including niche hedge funds). FSL already provides ORF data to large accountancy firms, as well as boutique practices, and understands the complications you face. With no long-term contract commitment and a turnaround time as fast as 24 hours, FSL offers a service that is comprehensive, auditable and bespoke. We provide the best fund coverage in the market; we can provide original data from the fund manager; and our service is specifically tailored to your needs.

FSL’s offshore fund data coverage includes:

  • Excess Reportable Income (ERI).
  • Equalisation policy & Equalisation rate (yearly/quarterly/daily).
  • Distributions (Dividend/Interest).
  • Reporting period.
  • Fund distribution date.
  • Ongoing reporting fund status check.
  • Currency conversions as per HMRC guidance.
  • Transparent fund reports.
  • Constant NAV fund identification.

FSL’s Offshore Reporting Funds solution can make HMRC offshore investment tax reporting easier and streamlines the task of identifying funds and determining tax liabilities. At this time of year it is definitely worth discussing your inhouse processes for gathering ORF data. What are the pain points? What could be done to improve the process? Is it really the best use of your time to be collating and correcting ORF data? Debate the need for setting aside budget to ensure a full set of data for each client’s investments is available to you next year. At FSL, we are happy to discuss your options and provide you with costs for your budget requirements.


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