According to data obtained under a Freedom of Information Act request, HMRC raked in £5.7 million from requests to foreign tax authorities for information on expat British taxpayers in 2017, nearly three times the amount in 2016 (£2 million), and over seven times the amount in 2013 (£796,835).
HMRC made just over a thousand requests to foreign tax authorities for information on expat British taxpayers in 2017, representing a yield of £5,664 per taxpayer.
The requests for information on British taxpayers working abroad were made by the Mutual Assistance in the Recovery of Debt (MARD) team at HMRC. The MARD team is empowered to take legal proceedings to enforce a foreign debt claim as might be taken to enforce a corresponding UK claim. Tax debts can be recovered from EU and some non-EU jurisdictions.
Contractor accountants, Access Financial, who obtained the data said 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 has stepped up the volume of requests for information on British taxpayers working abroad and is focusing its enquiries on high value targets.”
“It used to be the case that tax authorities rarely acted in a joined-up way, which allowed taxpayers who frequently moved between countries to slip between the cracks. There is an incorrect assumption that people cease to be tax resident in the UK when they work abroad but very often a UK tax liability will arise on foreign earnings."
A global tax transparency initiative called Global Reporting Standard (GRS) was launched last summer with the first automatic information exchanges taking place in September 2017. 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: “Offshore tax avoidance schemes have been widely touted and these can be tempting to contractors operating in continental European markets, where the tax burden can be significantly higher than the UK.
"The promotors of these schemes often claim to have HMRC’s approval, but this is false advertising. If HMRC deems a scheme to be non-compliant, it can demand backdated tax, penalties and interest. HMRC now has the power to compel taxpayers to pay their potential tax liabilities up front, instead of having to chase them through the courts.
“Some offshore schemes promise taxpayers that they can retain up to 90 per cent of their income. People 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 2018