According to data obtained under a Freedom of Information Act request from contractor accountancy and payroll firm, Access Financial, HMRC made over a thousand (1,085) requests to foreign tax authorities for information on expat British taxpayers in 2016, more than double the number in 2015 (499) and more than four times the number in 2014 (266).
The requests for information on British taxpayers working abroad were made by the Mutual Assistance in the Recovery of Debt team at HMRC. In 2016 the team netted nearly £2 million from requests for information to foreign tax authorities, which equates to £1,833 per taxpayer.
Access Financial says that British expats caught out by HMRC will have paid considerably more in penalties on top of the overdue tax. This is because HMRC can charge an increased penalty where the income or asset that gives rise to the penalty is held outside of the UK. For income or assets outside the UK, HMRC can impose penalties of up to 200 per cent of the value of the outstanding tax.
Kevin Austin, Chief Executive of Access Financial, said: “HMRC is stepping up compliance activity against British contractors who work abroad. HMRC is making more requests for information on taxpayers but it is also sharing and receiving more information automatically as part of a global drive for greater tax transparency.
“Historically, there was a widespread view that tax authorities seldom acted in a joined-up way and so it was easy to slip between the cracks. A significant proportion of British contractors who are working abroad, or have worked abroad recently, are likely to have not paid the correct amount of tax. Despite what their promoters may claim, some complicated tax avoidance structures will turn out to be non-compliant, so even where people haven’t deliberately sought to hide their money, they may be caught out.
“HMRC has the power to instruct foreign tax authorities to collect tax on its behalf and vice versa, and is increasingly asking its European counterparts to pursue expats with bills for disputed tax. Working in a fully compliant way while abroad is more important than ever before.”
Global Reporting Standard
A global tax transparency initiative called Global Reporting Standard (GRS) was launched this summer with the first automatic information exchanges taking place in September. Participants in the GRS include most European countries, the Crown Dependencies and overseas territories. Information on taxpayers with accounts based in another 50 jurisdictions, including Switzerland, Monaco and Singapore, will begin to be exchanged in September 2018.
According to Access Financial, British contractors utilising offshore tax solutions, many of which promise high levels of take-home pay, are facing ever-greater risks as information exchange between tax authorities becomes more systematic.
Kevin Austin said: “There have been a plethora of offshore tax solutions touted online in recent years. These can seem particularly tempting to contractors operating in continental European markets, where the tax burden can be significantly higher than the UK. Many of these schemes claim to have HMRC approval but this is false advertising. HMRC never endorses schemes, and even if a scheme operates for years, HMRC can at any point decide that the scheme is non-compliant, which can leave contractors exposed to large sums in backdated tax, interest and penalties.
“Some offshore schemes promise contractors that they can retain up to 90 per cent of their income. Contractors tempted by these schemes need to clearly evaluate the risks, which are much greater now than they have been in the past. As a rule of thumb, if a scheme sounds like it’s too good to be true, it probably is.”
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Susie Hughes © Shout99 2017