HMRC Compliance Checks on Overseas Income: What Triggers One

An HMRC compliance check on overseas income is a formal review of whether you paid the right UK tax on income, gains or assets abroad. It is usually triggered when data HMRC receives from other countries does not match your UK tax return, or shows overseas income where no return was filed. For Americans in the UK, US bank and brokerage accounts, US rental property and US pensions are where these checks start.

HMRC does not publish how it chooses whom to check. What it does publish is the process: factsheets that explain your rights, the time limits it works within, and the penalty ranges it applies. This guide uses that published material to explain what sets off a check into overseas income, how a check differs from a letter asking you to review your affairs, and what to do in the first month. If a check has already started, our HMRC compliance check overseas income support covers the next steps.

What is an HMRC compliance check on overseas income?

An HMRC compliance check is HMRC's process for confirming that a person is paying the right tax at the right time and claiming the right allowances and reliefs. Factsheet CC/FS1a covers Income Tax, Capital Gains Tax, Inheritance Tax, National Insurance and several other taxes, and HMRC gives you the relevant factsheet when a check starts.

A check into overseas income looks at whether income or gains from outside the UK should have appeared on a UK return and did not, or appeared with the wrong figures. For a UK resident with US ties, that usually means one of these:

• dividends, interest or gains in a US brokerage or bank account;
• rent from a US property kept after moving to the UK;
• withdrawals from a 401(k), IRA or other US pension;
• US self-employment income or US company income;
• distributions from a US trust or estate.

A UK resident is generally taxed on worldwide income, so each of these can belong on the SA106 foreign income pages of a Self Assessment return. Residence is decided year by year under the Statutory Residence Test, and for 2025 to 2026 onwards some new arrivals can claim the foreign income and gains regime instead.

What triggers an HMRC compliance check on overseas income?

The most common trigger is a mismatch between data and returns. HMRC receives financial account information from other tax authorities every year, and a check often starts when that information shows overseas income that a UK return does not.

Automatic exchange of financial account information

Under the Common Reporting Standard, the UK requires its banks and investment firms to report accounts held by people resident elsewhere. In return, HMRC's International Exchange of Information Manual says partner jurisdictions supply HMRC with similar information on UK tax resident individuals. The United States works through a separate arrangement: the UK-US automatic exchange of information agreement, signed in September 2012 to implement FATCA, which provides for annual automatic exchange of account information under Article 27 of the US-UK tax treaty.

None of this means every account abroad leads to a letter. It means the old assumption, that HMRC cannot see a US account, is not a safe basis for leaving income off a UK return.

Other common triggers

What HMRC sees	Why it raises a question
Overseas account data with no UK return filed	The person may have needed to register for Self Assessment and did not.
Foreign Tax Credit Relief claimed with little or no foreign income shown	The relief only makes sense against foreign income on the same return.
Overseas income that changes sharply between years	A drop may mean a source was left out; a rise may mean earlier years were understated.
A UK return showing the remittance basis or FIG regime	HMRC can check that the claim was valid for that year and correctly made.
Public information about overseas property or a business	CC/FS1a says HMRC may observe and keep publicly available material, such as company and land records and public social media.

Some checks also start because the return itself has an error HMRC can see without any outside data, for example a foreign income total that does not add up.

Is an HMRC letter about overseas income a compliance check?

Not every HMRC letter about overseas income is a compliance check. HMRC sends some letters to many people at once, asking them to review their offshore income and correct anything that is wrong. HMRC calls this the One to Many approach.

HMRC's Compliance Handbook at CH600120 sets the line: if HMRC wants a customer to provide information or records to show their tax affairs are right, it must open a compliance check; otherwise it must make clear that providing information is voluntary. A compliance check letter tells you a check has started, says what HMRC wants, and gives you the officer's details and a factsheet such as CC/FS1a or, for checks run by Campaigns and Projects teams, CC/FS1b.

A voluntary letter still matters. If you reply that everything is correct when it is not, that statement can count against you later. And once HMRC has written to you about a specific risk, a disclosure you then make is more likely to be treated as prompted, which carries a higher minimum penalty.

How far back can HMRC go?

HMRC's time limits depend on whether it is still inside the enquiry window and, after that, on why tax was lost.

The enquiry window. HMRC's Self Assessment Manual at SAM31100 says that for a return filed on time, the enquiry window runs for 12 months after the date HMRC received the return. For a late return it runs to the quarter date after the first anniversary of receipt; the quarter dates are 31 January, 30 April, 31 July and 31 October. Inside the window HMRC can open an enquiry without needing to show anything was wrong.

After the window: discovery. Once the window closes, HMRC has to make a discovery assessment, and how far back it can reach depends on behaviour. HMRC's guide to making a disclosure and CH53510 set out the limits:

Behaviour	Normal limit	Where lost tax involves an offshore matter
Reasonable care taken	4 years	12 years, from 2015 to 2016 onwards
Careless	6 years	12 years, from 2013 to 2014 onwards
Deliberate	20 years	20 years

The 12-year offshore limit applies to Income Tax, Capital Gains Tax and Inheritance Tax. CH53510 gives one important exception: it does not apply where, before the normal 4 or 6 year limit ran out, HMRC received relevant overseas information from which it could reasonably have been expected to spot the lost tax, and it was reasonable to expect HMRC to assess within the normal limit.

What happens during an HMRC compliance check?

An HMRC compliance check follows a set pattern, and factsheet CC/FS1a describes each stage.

1. Opening letter or call. HMRC says a check has started and what it needs. If HMRC phones, you can ask for contact in writing instead.
2. Requests for information. HMRC asks for records such as US brokerage statements, Forms 1099, US returns and property accounts. There is no fixed reply period in the factsheet; tell the officer if you need more time.
3. Meetings and visits. HMRC may ask to meet. You can choose whether to attend. HMRC only asks to visit a home if a business is run from it.
4. Formal information notices. If information is not agreed, HMRC can issue an information notice. CC/FS1a says you cannot ignore one. Under CH24340, an appeal must be in writing and reach HMRC within 30 days of the date on the notice, and you cannot appeal a request for statutory records.
5. Penalty discussion. HMRC tells you if it is considering penalties and how your disclosure and help affect them.
6. Closure. The check ends with one or more decision notices, such as an amended return, an assessment or a penalty notice, or with a contract settlement, a binding agreement to pay what is owed.

If you disagree with an appealable decision, CC/FS1a gives three routes within 30 days of HMRC's letter: send the officer new information, ask for a review by an officer not previously involved, or appeal to the independent tribunal. You must keep filing returns and paying tax that falls due while the check runs.

What penalties apply to overseas income?

Penalties for overseas income are charged as a percentage of the extra tax, and they depend on three things: why the error happened, whether you told HMRC before it found the problem, and which territory the income came from. HMRC's factsheet CC/FS17 sets three territory categories, with maximum penalties of 100%, 150% and 200% of the tax. For category 1 territories the ranges are:

Disclosure	Careless	Deliberate	Deliberate and concealed
Unprompted	0% to 30%	30% to 70%	40% to 100%
Prompted	15% to 30%	45% to 70%	60% to 100%

Where you sit within a range depends on the quality of your disclosure: telling, helping and giving access. CC/FS1a adds that where disclosure takes a long time, for example 3 years or more, HMRC usually restricts the reduction to 10 percentage points above the minimum of the range. Interest on late paid tax is charged on top.

There are also criminal offences for failing to declare offshore income, which GOV.UK says apply from 6 April 2017. They do not apply where the extra tax is £25,000 or less, or where the income or gains were reported to HMRC under the Common Reporting Standard, and a reasonable excuse is a defence. If deliberate behaviour is involved, take advice before replying to HMRC at all.

What people get wrong when HMRC writes

• "The US already taxed it." The US-UK treaty decides which country has the first right to tax and how double tax is relieved; it rarely removes the UK charge. UK tax is reduced by Foreign Tax Credit Relief, which has to be claimed and may not cover the full US tax.
• "I don't file a UK return, so nothing was due." An employee taxed under PAYE with untaxed overseas income may have needed to register for Self Assessment. Not having a return is often the problem HMRC is asking about.
• "I can sort it out with one corrected year." HMRC looks for the pattern. If one year is wrong for a structural reason, such as an account never reported, the same issue usually runs back through earlier years.
• "I'll wait and see what HMRC finds." Waiting turns an unprompted disclosure into a prompted one and can restrict the penalty reduction.
• "The FIG regime covers it." HMRC's helpsheet HS266 says the foreign income and gains regime must be claimed on the return for each tax year you want it to apply to, and no claim can be made for a year before 6 April 2025.

What to do if HMRC opens a check into your overseas income

1. Read the letter for what it is. Check whether it says a compliance check has started, names an officer and encloses a factsheet, or whether it asks you to review your affairs voluntarily.
2. Note every date. Information notices and appealable decisions carry 30-day limits.
3. Gather both countries' records. US returns, Forms 1099 and 1042-S, brokerage and bank statements, property accounts and UK returns for every year in question.
4. Rebuild the UK position year by year. Confirm residence, then the overseas income that should have been taxed, then the Foreign Tax Credit Relief available.
5. Decide on disclosure before replying. If more is wrong than HMRC has asked about, tell the officer. HMRC's disclosure guide says that once an enquiry is open, disclosures should go to the person conducting it.
6. Appoint a representative. CC/FS1a says you can have someone deal with HMRC for you, while you remain responsible for taking reasonable care.

Illustrative example: Dana, a US citizen working in London on PAYE, has never filed a UK return. Her US brokerage account pays dividends each year, which she reports on her US Form 1040. HMRC writes asking about overseas account income. Dana's adviser confirms she was UK resident in each year, calculates the UK tax on the dividends, claims Foreign Tax Credit Relief for the US tax withheld, and tells the officer about a small US rental profit HMRC had not asked about. Because the extra disclosure was made before HMRC raised it, she is in a stronger position on penalties for that part. (Illustrative only; every case turns on its own facts.)

How the US side fits in

An HMRC compliance check on overseas income is a UK matter, but the figures come from the US side, and fixing a UK problem can expose a US one. A US citizen in the UK who missed UK tax on a US account may also have missed FBAR or Form 8938 filings on UK accounts, or US reporting of UK pensions and ISAs. Before agreeing figures with HMRC, it is worth checking that both countries' returns tell the same story. Our guide to double taxation relief between the US and UK explains how the two systems interact, and if you are coming forward before HMRC writes, see our guide to the Worldwide Disclosure Facility.

US/UK Cross Border Tax — US CPAs and UK tax advisers working as one team; London, Manchester, New York, San Francisco — helps Americans in the UK respond to HMRC checks and put both countries' filings in order. If HMRC has written to you, contact us with the letter and its date.