The Foreign Bank Account, the Family Property (usufrutto/nuda proprieta’) and the Tax Problem no one expected
It often starts with something ordinary.
A joint bank account in Italy with a parent.
A small apartment abroad inherited years ago.
A foreign property where someone else has the usufrutto and the children hold the nuda proprietà.
Rental income paid into a local account.
A sale of overseas property where tax was dealt with abroad, but nobody considered the UK position.
Then, one day, a letter arrives from HMRC.
It may say that HMRC has received information about offshore assets or income. It may refer to foreign accounts, overseas investments, property, or data received from another tax authority.
For many UK residents, that letter is the first time they realise that a perfectly normal family arrangement abroad may have created a UK tax issue.
The problem is rarely the existence of the asset itself. There is nothing wrong with owning money, property or investments outside the UK. The issue is whether the UK tax position has been properly reviewed and, where necessary, disclosed.
That is where the HMRC Worldwide Disclosure Facility becomes important.
HMRC’s Worldwide Disclosure Facility can be used by anyone who needs to disclose a UK tax liability connected wholly or partly with an offshore issue, including foreign income, assets, activities or funds held outside the UK. HMRC also confirms that offshore matters should be disclosed through the Worldwide Disclosure Facility as part of the digital disclosure service.
Why foreign assets are now much more visible to HMRC
The old idea that overseas accounts are invisible is no longer realistic.
More than 100 countries have committed to exchange financial information under the OECD Common Reporting Standard, and HMRC expressly refers to CRS in its Worldwide Disclosure Facility guidance. HMRC’s International Exchange of Information Manual was also updated on 6 May 2026 and contains a dedicated section on automatic exchange of financial account information.
In practical terms, HMRC may receive data about:
foreign bank accounts;
investment portfolios;
interest and dividends;
account balances;
foreign insurance or investment products;
assets connected with overseas income;
and, in some cases, information that leads HMRC to ask questions about property or historic funds.
This does not mean HMRC always understands the full story.
A foreign bank account may be a convenience account.
A joint account may belong economically to one person only.
A property may be split between usufrutto and nuda proprietà.
An overseas asset may have been inherited, not purchased.
Income may have been taxed abroad already.
A person may have believed, wrongly but genuinely, that paying tax in Italy, France, Spain or another country meant there was nothing further to do in the UK.
But once HMRC receives offshore data, the taxpayer needs a coherent explanation supported by evidence.
The joint foreign bank account problem
One of the most common cases involves a joint overseas bank account.
This is particularly common among Italian families. A UK resident adult child may be added to a parent’s Italian bank account for administrative reasons, perhaps to help with bills, medical costs, succession planning or practical family management.
Years later, HMRC receives information showing that the UK resident is named on the account.
That does not automatically mean all the money belongs to the UK resident. It also does not automatically mean that all interest, dividends or gains are taxable on them.
But it does mean that the position must be analysed carefully.
The key questions are usually:
Who provided the funds?
Who was beneficially entitled to the money?
Who received the income?
Was the UK resident merely a signatory or a true joint owner?
Were funds used personally by the UK resident?
Was the account connected with inherited assets, foreign rental income or a property sale?
Was any income omitted from a UK tax return?
HMRC’s own disclosure guidance is clear that where, for example, husband and wife have undisclosed income, separate disclosures may be required showing each person’s share of the income. HMRC also states that a separate notification is needed for each person or company.
That principle matters in joint account cases. The answer is not always “50/50”. The correct analysis depends on the facts, beneficial ownership and evidence.
Usufrutto and nuda proprietà: why Italian property can be misunderstood in the UK
Another frequent issue is the Italian property structure involving usufrutto and nuda proprietà.
For Italian families, this is familiar. For HMRC, it may not be.
A parent may retain the usufrutto, meaning the right to use the property or receive income from it. The children may hold the nuda proprietà, meaning bare ownership subject to the usufruct. Over time, on death or expiry of the usufrutto, the ownership position may consolidate.
From a UK tax perspective, this needs careful treatment.
It is not enough to translate the words into English and assume the UK tax answer follows automatically. The analysis may need to consider:
who had the right to occupy the property;
who had the right to rental income;
who bore expenses;
who received sale proceeds;
whether there was a disposal for UK capital gains tax purposes;
whether any foreign tax was paid;
whether double tax relief is available;
whether the taxpayer was UK resident in the relevant tax years;
and whether the asset or income was ever reported to HMRC.
This is precisely the kind of fact pattern where a superficial disclosure can create unnecessary problems.
A UK resident who owns nuda proprietà may not have received income, but may still need advice if the property was sold, transferred, inherited or later consolidated. A UK resident with usufrutto may have an income entitlement that needs to be considered. The UK tax analysis depends on the economic rights, not just the label used in the foreign deed.
“But I paid tax abroad” is not the end of the matter
Many offshore disclosure cases arise because the taxpayer dealt with tax in the foreign country and assumed the UK position was therefore complete.
That assumption can be wrong.
A UK tax resident may need to report foreign income and gains in the UK even where tax has already been paid abroad. In many cases, double tax relief may reduce or eliminate double taxation, but that does not necessarily remove the UK reporting obligation.
Common examples include:
Italian rental income;
sale of an inherited property abroad;
interest from foreign bank accounts;
dividends from overseas investments;
foreign pension income;
income from jointly held family accounts;
capital gains on foreign shares or funds;
income arising within offshore portfolios;
foreign life policies or investment bonds;
and income connected with trusts, companies or foundations outside the UK.
The danger is not always the tax itself. Sometimes the tax is modest. The real risk can be penalties, interest, incorrect assumptions, missing records and the perception that the taxpayer failed to come forward.
The Worldwide Disclosure Facility is not an amnesty
The Worldwide Disclosure Facility is useful, but it should not be misunderstood.
It is not an amnesty.
It does not automatically remove penalties.
It does not guarantee that HMRC will accept the taxpayer’s interpretation.
It does not protect a taxpayer who submits an incomplete or inaccurate disclosure.
HMRC’s digital disclosure service requires the taxpayer to notify, disclose, make a formal offer, pay what is owed, and assist HMRC if further information is requested. Once HMRC acknowledges the notification, the taxpayer must normally submit the disclosure within 90 days and pay, or make payment arrangements, by the same deadline.
That 90-day period can pass quickly.
For a simple UK omission, it may be manageable. For a cross-border case involving foreign property, exchange rates, old bank statements, Italian succession documents, usufrutto, nuda proprietà, joint accounts and foreign tax credits, 90 days is not a long time.
This is why professional advice should be taken before the disclosure is submitted, and ideally before the notification is made.
Penalties: voluntary disclosure can make a difference
Penalties in offshore cases can be significant.
For older offshore matters, the Requirement to Correct and Failure to Correct regime can be particularly severe. HMRC’s offshore penalty factsheet states that Failure to Correct penalties are a minimum of 100% of the tax owed and can have a standard rate of 200%, although reductions may be available depending on whether the disclosure is voluntary and the quality of the disclosure.
This is why the narrative matters.
HMRC is not only looking at numbers. HMRC is also looking at behaviour.
Was the omission deliberate?
Was it careless?
Was there a reasonable excuse?
Did the taxpayer misunderstand the UK rules?
Did they rely on a foreign accountant?
Was the income taxed abroad?
Were they merely named on a joint account?
Did they have only bare ownership of a property?
Did they actually receive the income or proceeds?
A well-prepared disclosure does not simply calculate tax. It explains the facts properly.
A typical Vectigalis Tax case study
Consider a UK resident originally from Italy.
Her father added her to an Italian bank account many years ago. She never used the money personally. The account was used mainly for family expenses and later received small amounts of rental income from an Italian property.
The property had been arranged under an Italian structure: the father retained the usufrutto, while the children held the nuda proprietà. After the father’s death, the property was sold. Italian tax advice was taken locally, and the family assumed the matter was closed.
Several years later, HMRC receives offshore account information.
At first sight, HMRC may see a UK resident connected with a foreign bank account, foreign rental income and property sale proceeds.
But the real tax analysis is more delicate.
Who was entitled to the rent before the father’s death?
Was the UK resident beneficially entitled to the bank account funds?
When did the UK resident acquire a relevant interest in the property?
Was there a UK capital gain?
Was foreign tax paid?
Was any part of the income already declared?
Which years are still assessable?
Is the disclosure voluntary or prompted?
What penalty position is defensible?
This is the difference between submitting numbers and presenting a properly reasoned disclosure.
Why clients should not ignore an HMRC offshore letter
An HMRC letter about offshore income or assets should not be ignored.
It should also not be answered casually.
A rushed response can create problems if it admits something incorrectly, overlooks a technical defence, fails to explain beneficial ownership, or treats a joint account as taxable without analysing who actually owned the funds.
Equally, doing nothing can make the position worse.
The better approach is to pause, gather documents, reconstruct the facts and decide whether a Worldwide Disclosure Facility submission is required.
Relevant documents may include:
foreign bank statements;
property purchase deeds;
inheritance documents;
Italian succession filings;
usufrutto and nuda proprietà deeds;
rental statements;
foreign tax returns;
foreign tax payment receipts;
sale completion statements;
exchange rate records;
UK tax returns;
and correspondence with foreign accountants or notaries.
The objective is not to over-disclose. The objective is to disclose correctly.
How Vectigalis Tax can help
Vectigalis Tax advises UK residents with complex offshore tax issues, particularly where the facts involve foreign property, Italian assets, inherited wealth, joint accounts, usufrutto, nuda proprietà, foreign rental income and cross-border family arrangements.
We help clients establish a technically robust and HMRC-defendable position before a disclosure is made.
This may include:
reviewing whether a disclosure is actually required;
identifying the correct UK tax years;
analysing beneficial ownership of foreign accounts and property;
considering the UK treatment of usufrutto and nuda proprietà;
calculating foreign income, gains, tax, interest and penalties;
considering double tax relief;
and managing the position with HMRC.
The goal is simple: clarity, control and no surprises.
A disclosure should tell the truth, but it should tell the whole truth in the right technical language.
The most dangerous offshore tax problem is often the one that looks harmless.
A joint account.
A family property.
An inherited flat.
An Italian usufrutto.
A small amount of rental income.
A foreign account left open for convenience.
Individually, these may look minor. Together, they can create a UK tax disclosure issue.
If you are UK resident and have foreign income, property, joint overseas accounts, usufrutto, nuda proprietà or inherited assets abroad, you should review your UK tax position before HMRC does it for you.
For confidential advice on the HMRC Worldwide Disclosure Facility, offshore income, foreign property and cross-border tax disclosures, contact: