HMRC trebles overseas contractors’ tax haul to £5.7m

British expats have found themselves in the firing line as HMRC has nearly trebled the amount of tax collected following requests for information to foreign tax authorities, according to specialist payroll firm Access Financial

It says data obtained under a Freedom of Information Act request shows HMRC raised £5.7m as a result of requests to foreign tax authorities for information on expat British taxpayers in 2017, nearly three times the 2016 amount (£2m), and over seven times the amount in 2013 (£796,835).

HMRC made 1,006 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. Tax debts can be recovered from EU and some non-EU jurisdictions.

Access Financial says that British expats identified by HMRC will have paid considerably more in penalties on top of the overdue tax. This is because HMRC can charge an increased penalty of up to 200% of the value of the outstanding tax where the income or asset that gives rise to the penalty is held outside of the UK.

Kevin Austin, chief executive of Access Financial, said: ‘International tax authorities are acting in a more coordinated way, making it increasingly important that British expats receive the right advice and ensure their tax affairs are in order. HMRC has stepped up the volume of requests for information on British taxpayers working abroad and is focusing its enquiries on high value targets.

‘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 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.’

Access Financial says the spike in tax demands follows the launch of the common reporting standard (CRS), which was launched last summer with the first automatic information exchanges taking place in September 2017. Participants in the CRS 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.

The company says UK contractors who have utilised offshore tax solutions in order to minimise tax may find they are now subject to investigation.

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.’

Report by Pat Sweet

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