HMRC letters about overseas income come from CRS and FATCA data. What the certificate of tax position really is, how the Worldwide Disclosure Facility works, and the penalties that apply.
If an HMRC letter about overseas income or gains lands on your doormat, it almost certainly means HMRC has received data about a foreign account connected to you and wants you to check your returns. It is not an enquiry, not an accusation, and it does not mean you owe anything — but it is not junk mail either, and ignoring it turns a cheap problem into an expensive one. Read it, check the years it names, and reply in writing by the date given, whether or not anything is wrong.
Nothing about these letters is random. The UK operates two automatic exchange regimes: the Common Reporting Standard (CRS), the OECD framework under which participating jurisdictions swap financial account data, and FATCA, implemented in the UK through an intergovernmental agreement with the US. HMRC receives information from other countries about UK residents with accounts overseas, while UK institutions report on account holders resident elsewhere — HMRC's campaign material described exchanging financial account data with more than 100 countries.
What arrives is not a vague hint: the account holder's name, address and date of birth, the balance and payments into the account, and details of assets held through overseas structures. HMRC matches that against your Self Assessment returns — or the absence of them — and where the two do not reconcile, a letter goes out.
This matters particularly for Americans and other dual nationals in the UK. The UK–US FATCA agreement rests on reciprocal reporting: it is not only UK banks reporting US account holders to HMRC for onward transmission to the IRS — information flows the other way too, which is why a US brokerage or savings account held by a UK resident can surface in HMRC's data. And dual nationals hold exactly the profile that generates matches: a legacy current account, a brokerage account, an inherited holding. Holding money overseas is not the problem, and HMRC says so in its own material. The mismatch is.
HMRC sends several distinct letters carrying very different legal weight. Identify yours first.
| Letter type | What HMRC wants | Sensible response |
|---|---|---|
| "Overseas income and gains" nudge letter | You to check your returns for the years stated | Review those years, then reply in writing by the stated date — even if nothing is due |
| Certificate of tax position (enclosed) | A signed tick-box declaration, usually covering all years | Reply substantively under your own covering letter instead |
| Letter to an offshore entity holding UK property | ATED, non-resident CGT and corporation tax position | Reconstruct the entity's UK filing history first; needs specialist input |
| Schedule 36 information notice | Specific documents, under statutory power | You must comply. Failure attracts a £300 penalty and then daily penalties |
| Notice opening a formal enquiry | Nothing yet — a return is under formal review | Take representation; correspondence is now on the record |
| Code of Practice 9 / Contractual Disclosure Facility | An admission of deliberate behaviour, within 60 days | ⚠ Stop. Get representation before replying at all |
Rows two and four are the ones people confuse: an information notice is backed by Schedule 36 Finance Act 2008 and carries penalties, a certificate does not.
The certificate typically offers a few tick-box options — broadly, that you have tax to pay and will disclose, or that your affairs are up to date and no disclosure is needed — to be signed and returned by a stated date. Three features deserve attention.
The approach most UK advisers take is to respond fully and on time, but by letter rather than by ticking a box: set out which years and sources you reviewed, what you found, and what you are doing about it. That gives HMRC the substance without a blanket certification. What you should not do is ignore the letter.
Work the years the letter names, from primary documents rather than memory.
1. Confirm your residence status for each year. UK residents are normally taxable on worldwide income. If you arrived, left or split a year, that changes the answer first.
2. Pull the statements — interest certificates, dividend vouchers, consolidated brokerage statements, rental statements, pension summaries — for every year named, and convert to sterling using HMRC's published rates.
3. Check the reliefs. Foreign Income and Gains relief from 6 April 2025, or the remittance basis for earlier years, may have removed the liability — and unclaimed foreign tax credit relief often means the extra UK tax is small or nil even where income was omitted.
4. Compare against the return actually filed — not the draft, not the adviser's schedule.
5. Quantify. Additional tax per year, and in total. That number decides the route.
If the error sits inside the amendment window you can fix it directly: HMRC allows you to correct a return within 12 months of the Self Assessment deadline, so for 2024 to 2025, usually by 31 January 2027. Outside it, you must disclose.
The Worldwide Disclosure Facility (WDF) is HMRC's route for disclosing a UK tax liability relating wholly or partly to an offshore issue: income from a source outside the UK, assets held outside the UK, activities carried on wholly or mainly outside the UK, or funds connected to unpaid UK tax transferred overseas. It runs through the Digital Disclosure Service (DDS), also the channel for domestic disclosures of income tax, CGT, inheritance tax, corporation tax and National Insurance. VAT errors go elsewhere.
The mechanics are two-stage.
1. Notify. You tell HMRC you intend to disclose, without details. HMRC issues a Disclosure Reference Number (DRN) and Payment Reference Number (PRN) to quote on everything that follows.
2. Disclose and pay. You then have 90 days from HMRC's acknowledgement to file the full disclosure. Where it is complex you can request a further 90 days, giving up to 180 days in total. Tax, interest and penalties are payable on the date the disclosure is submitted.
Two conditions are easy to miss. The facility requires an offer for the full amount owed — a partial disclosure is outside its terms — and if you are already under enquiry, HMRC refers the disclosure to the investigating officer to decide whether it can be accepted. How many years you must cover depends on behaviour: broadly four where you took reasonable care, six where careless, and up to twenty where the behaviour was deliberate or you should have registered for Self Assessment and did not.
Offshore penalties are harsher than domestic ones, and the loading depends on the category of the territory. Categories reflect a jurisdiction's willingness to share tax information with the UK: Category 1 carries a maximum penalty of 100% of the tax, Category 2 a maximum of 150%, and Category 3 a maximum of 200%.
| Behaviour | Category 1 | Category 2 | Category 3 |
|---|---|---|---|
| Careless, unprompted | 0%–30% | 0%–45% | 0%–60% |
| Careless, prompted | 15%–30% | 22.5%–45% | 30%–60% |
| Deliberate, unprompted | 30%–70% | 40%–105% | 50%–140% |
| Deliberate, prompted | 45%–70% | 62.5%–105% | 80%–140% |
| Deliberate and concealed, unprompted | 40%–100% | 55%–150% | 70%–200% |
| Deliberate and concealed, prompted | 60%–100% | 85%–150% | 110%–200% |
Inaccuracy penalty ranges for 2016 to 2017 onwards, per HMRC's Compliance Handbook CH116600.
This is why the letter's arrival matters. A disclosure made before HMRC contacts you can be unprompted, with a nil minimum for careless behaviour. Once a letter has arrived, a disclosure is generally treated as prompted and the floor rises.
Assume £8,000 of UK income tax went unpaid on deposit interest from a Category 1 territory across the tax years 2019 to 2020 through 2024 to 2025, carelessly rather than deliberately.
The gap is meaningful but survivable. It stops being survivable further up the scale: the same £8,000, deliberate and concealed, prompted, in a Category 3 territory carries a penalty of £8,800 to £16,000.
A harsher regime applies to older non-compliance. The Requirement to Correct became law in November 2017 and required offshore income tax, CGT or IHT non-compliance existing at 6 April 2017 to be put right by 30 September 2018; HMRC states plainly that it is now too late to correct compliantly. What remains falls into Failure to Correct penalties:
The year the income arose therefore matters enormously: two otherwise identical omissions, one from 2015 to 2016 and one from 2022 to 2023, can produce penalties an order of magnitude apart.
The 12-year offshore limit bites even where you took reasonable care. One carve-out is worth knowing: it does not apply where HMRC had already received relevant overseas information from which it could reasonably have been expected to become aware of the lost tax before the ordinary limit expired. Given how long CRS data has been flowing, that is not always theoretical — but it is a point for an adviser to run, not to assert in a first reply.
This is the most common outcome, and it still needs a response.
A UK disclosure fixes the UK. The same accounts that triggered HMRC's letter are usually reportable to the IRS and FinCEN as well.
Two separate obligations apply. The FBAR (FinCEN Form 114) is required where the aggregate value of your foreign financial accounts exceeds $10,000 at any time in the calendar year — a single threshold regardless of filing status, filed separately from the return, due 15 April with an automatic extension to 15 October. Form 8938 is attached to the return, and for taxpayers living abroad the thresholds are $200,000 at year end or $300,000 at any point in the year if single, and $400,000 or $600,000 respectively on a joint return.
If you have been in the UK for years without filing, see our guides to catching up on missed US tax returns and unfiled FBARs, and to the IRS Streamlined Foreign Offshore Procedures; our complete guide to US tax compliance for Americans abroad covers how the two systems interact.
Plan the UK disclosure and the US catch-up together: the UK tax you end up paying drives the foreign tax credits available on the US returns, and a statement of non-wilful conduct made to the IRS should not contradict what you have told HMRC about the same accounts.
Get professional representation before replying — not after — if any of these applies.
Most of these letters can be answered with a single, well-evidenced reply. The ones that go wrong are where someone signs a certificate they have not verified, or discloses without first settling whether the behaviour was careless or deliberate. If your letter names several years, involves an offshore structure, or arrives alongside a US filing gap, have the analysis done before you write back. At Next Tax Source an ACCA-qualified accountant reviews and signs off UK positions, and a licensed CPA or Enrolled Agent signs off the US side. See how we work with US–UK expat clients, or book a consultation.
This article is general information about UK and US tax rules, not advice on your circumstances. Rates, thresholds and time limits change; confirm the current position before acting.