Over 5.4k people inform HMRC about untaxed offshore assets

Over 5.4k people inform HMRC about untaxed offshore assets

Jun 20, 2024

The number of people admitting they had hidden untaxed offshore assets was up 146% to 5,427 last year

The sharp rise has seen much greater use of HMRC’s worldwide disclosure facility which allows the tax authority to share information with overseas banks, which means tax evaders have few places to hide their money.

Accountants at Lubbock Fine said that HMRC has been stepping up its campaign against UK taxpayers with undisclosed offshore income and gains.

HMRC has been collecting data from overseas banks and fund managers, and then using this information to send out nudge letters to UK residents threatening them with a full tax investigation if they do not voluntarily come forward.

Graham Caddock, director at Lubbock Fine, said: ‘The surge in people admitting to undertaxed income and gains shows that HMRC’s more active approach, supported by the amount of information they are receiving, is getting better and yielding more tax to help reduce the “tax gap”.

‘For tax evaders there are now very few places to hide.

‘HMRC believes that many UK taxpayers have been underpaying tax on their overseas assets and now armed with their new information gathering capability, they are determined to recover as much tax as possible.’

If a disclosure is made to HMRC via the worldwide disclosure facility, then it usually means the taxpayer avoids a higher penalty and a potential criminal prosecution. In more extreme cases of deliberate tax evasion, this could mean a custodial sentence.

Taxpayers who fail to make a voluntary disclosure to HMRC can face a tax penalty of up to 200% of the tax owed, and the possibility of having their details published on the list of deliberate tax defaulters.

It should be remembered that contacting HMRC before they come knocking on the door will always guarantee a lower tax penalty or one that can often be negotiated to zero if handled correctly.

In recent years, HMRC has also been receiving more information about accounts and investments held by UK taxpayers overseas through the common reporting standard (CRS).

This enables HMRC to automatically receive information from hundreds of different countries about offshore assets and accounts. This includes countries that had previously been considered popular for offshore tax evasion, including the Virgin Islands, Bermuda, Liechtenstein and Antigua.

From 2027 this data sharing will extend to cryptocurrency accounts.

Caddock added: ‘We expect that HMRC will continue to mailshot taxpayers that it suspects of tax avoidance as its opening gambit before it opens a full-scale tax investigation.

‘These nudge letter campaigns are a cost-effective way for HMRC to tackle non-compliant taxpayers – with better use of AI meaning that these letters will be issued with greater accuracy.

‘“If you think you may be underpaying tax on any of your overseas assets (including holiday homes), the best course of action is to make a voluntary disclose to HMRC as soon as possible – or risk facing a hefty penalty.’