HMRC’s crackdown on overseas tax evasion
In a single year, HM Revenue & Customs’ (HMRC) crackdown on overseas tax evasion has seen a massive increase in the number of people admitting to not paying tax. According to a Freedom of Information (FOI) request, 867 British expats declared they failed to pay the ammount they owed in 2018-19.
This marks a 12-fold increase compared to the 66 admissions during the previous tax year. However, it is predicted that HMRC ramp up investigations and inquiries even further to try and plug the public spending black hole caused by the coronavirus outbreak and the measures taken in response.
The FOI request revealed that the unpaid duty was owed on income or capital gains generated in the UK and then held offshore in bank accounts, trusts or companies across the world – often in low tax jurisdictions.
Over 40% of those declaring they have not paid tax currently live in the Channel Islands; nearly 10% in the Isle of Man and 6% in Switzerland. Liechtenstein, Hong Kong and Bermuda were also listed as residencies.
These disclosures of unpaid tax were made to the HMRC under the Worldwide Disclosure Facility, with admission given in return for facing a less severe penalty. However, they were not necessarily brought about by any sudden changes of heart of an awakening sense of civic duty.
The net has been closing on overseas unpaid tax for some time. Changes to legislation have brought more expat tax exiles into HMRC’s sights. This has forced some to make disclosures, but momentum is generated from these initial findings. Each disclosure adds to HMRC’s picture of the offshore market and each target hit presents new targets.
This, combined with more effective cross-border data sharing, has generated hundreds of new leads; which HMRC will no doubt be doggedly pursuing given the intense pressure on public finances back in the UK. It is believed that HMRC is going to further increase its efforts in tackling tax exiles to make up for the costs of the pandemic to the public purse.
According to an assessment by the Treasury, the covid-19 outbreak could cost the UK as much as £300bn ($363bn, €335bn). There have been rumours about the government handing HMRC greater powers to clamp down on tax evasion and avoidance to help cover the soaring bill of lost income and revenues caused by coronavirus.
It is not clear how much money HMRC will be able to retrieve from the 867 disclosures they have encouraged so far.
If you have any concerns or are approached by the HRMC, please free to contact us at email@example.com. Our tax specialists are here to help!