UK foreign tax evasion jumps 22%

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The number of people in the UK accepting tax exemptions on their overseas assets will rise to almost a quarter by 2023-24, government figures show.

From 4,630 in 2022-23 – an increase of 22 per cent – 5,643 people admitted to HM Revenue & Customs that they had not paid enough tax on their foreign wealth, according to a Freedom of Information request.

The government has promised to raise billions of pounds by cracking down on tax evasion. HMRC Funding for 5,000 additional compliance officers has been provided in the budget.

Tax experts say the rise in fraudulent declarations is due to various reasons. These include HMRC sending out a greater number of warning letters, receiving information from more countries on human offshore issues and increasing public awareness of information sharing.

Graham Caddock, director of tax investigations at Lubbock Fin, who made the FOI request, said: “HMRC’s pursuit of tax evaders has now left very few places open.”

He added that the tax authority is “using the information it gets from overseas properly, checking tax returns . . . The database is looking for those who avoid HMRC altogether.

Since 2018, international regulations have made the automatic exchange of information on financial accounts between tax authorities. These agreements were developed by the OECD and are known as the Common Reporting Standard (CRS) by 120 countries.

Participating countries include popular tax havens such as Switzerland, Bermuda, the British Virgin Islands and the Cayman Islands. Meanwhile, starting in 2027, the data sharing program will be extended to include crypto asset exchanges.

HMRC uses algorithms to identify offshore data records and information on UK residents. The system generates “foot letters” that are sent to individuals when discrepancies are found.

Dawn Register, tax dispute resolution partner at accountancy firm BDO, said HMRC suspected the information it was receiving now was “more accurate and subject to more analysis”. . . Using advanced AI technology”

This great analytical power may be one of the reasons behind the rise of tax returns.

“Awareness and education around CRS and tax reporting has encouraged more people to come forward and update their UK tax affairs,” she added.

Individuals can report unpaid tax on foreign assets using HMRC’s online global disclosure.

The maximum penalty for not declaring offshore income can be up to 200 percent of the tax owed and in the most serious cases, jail time.

By coming forward with disclosure after receiving a letter of support, Caddock said, he “significantly reduced” the risk of punishment.

HMRC estimates that the tax gap – the difference between what is expected to be collected in tax and what is paid – was £39.8bn in 2022-23, with £5.5bn potentially lost to evasion.

In data published earlier this year, HMRC estimated that the tax liability of UK-resident individuals with foreign income was around £300mn in 2018-19. Around 4 per cent of this group reported their tax liability to HMRC, the analysis found.