Offshore tax evasion clampdown produces 5.67m financial records

The crackdown on tax avoidance and evasion by individuals with offshore financial interests has resulted in over three million reports from overseas tax authorities to HMRC about UK residents holding funds offshore as a result of data generated through the Common Reporting Standard, reports Sara White

HMRC has confirmed that in 2018, the UK tax authority received reports about the offshore financial interests of around three million UK resident individuals, or the entities they control. This involved 5.67m individual records detailing offshore financial and bank accounts. The amount of tax at stake is not available as the data is confidential.

'We are unable to provide a figure on the amount of tax secured as a result of the Common Reporting Standard as this data is not in the public domain,' an HMRC spokesperson told Accountancy Daily.

The data download is a result of the Common Reporting Standard, which came into force in 2017. This agreement sees over 100 jurisdictions automatically exchanging financial account information between tax authorities, making it harder for people to hide money abroad as it gives HMRC much more detailed insight into offshore non-compliance.

So far, the Common Reporting Standard has seen two exchanges of information. The first was in September 2017 with 49 jurisdictions that were ‘early adopters’. The second was in September 2018 with an additional 51 jurisdictions. The third is due in September 2019 and currently, HMRC expects to receive information from around 100 jurisdictions.

This has allowed HMRC to move away from a policy of encouraging voluntary disclosures with lower penalties to heavily punishing those who have not taken the opportunity to come forward under the various worldwide disclosure facilities. At the same time, the requirement to correct rules put the onus on individual taxpayers to come clean about their offshore interests by last September by informing HMRC of past irregularities. From 1 October 2018 tougher penalties called ‘failure to correct’ came into force.

However, taxpayers are able to make disclosures about potential offshore liabilities through the worldwide disclosure facility (WDF) which gives individuals a chance to come forward and put their tax affairs in order. Individuals have been able to make disclosures through the WDF since 5 September 2016.

‘Ahead of the first exchange under the CRS, HMRC widely publicised the availability of the WDF to encourage individuals to come from forward and disclose any undeclared offshore tax liabilities before we are told about them through the CRS.

‘A “customer” who chooses not to come forward and waits for HMRC to identify that they paid less than they should will always be in a worse position than a “customer” who comes forward voluntarily and cooperates with HMRC’s enquiries,’ HMRC added.

Latest figures on offshore tax compliance show that HMRC has recovered £2.9bn in lost tax revenues since 2010 purely from targeting offshore abuse, before the Common Reporting Standard came into force in September 2018. Since 2016, HMRC has increased its investigations into the country’s wealthiest offenders six-fold.

Based on HMRC analysis of offshore risk, the latest strategy, No Safe Havens, sets the direction for the next phase of the government’s response to existing and emerging offshore risk. This strategy brings together HMRC’s response to offshore non-compliance, including evasion and avoidance, but will also focus on working with agents and intermediaries to help their clients avoid errors and make it simple for them to identify and correct errors.

‘The unprecedented amount of data that HMRC is receiving from a range of sources is at the heart of our approach,’ HMRC stated.

The anti-evasion activity is driven by HMRC’s specialist law enforcement team, based across the UK, which has 4,500 officers tackling offshore evasion, tax fraud, international smuggling and exports of controlled weapons. This set-up includes the fraud investigation service, bringing together civil and criminal tax investigation capabilities, including forensic accountants, insolvency practitioners, and data and technology experts.

In 2018, HMRC enforcement work resulted in:

•             over 1,000 individuals being charged for criminal offences;

•             835 people being convicted of fraud related offences;

•             almost 650 years’ worth of custodial sentences being handed out; and

•             and over £5bn in tax revenue recovered.

Financial secretary to the Treasury, Mel Stride MP, said: ‘I want the UK to remain at the forefront of fighting serious organised crime, and want us to be the global leader. HMRC’s fraud investigators show how with cutting edge technology and the right staff, we can tackle global tax fraud, setting an international example to other countries in this crusade.’

HMT/HMRC Policy paper, No Safe Havens 2019, released 13 March 2019 

Report by Sara White

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