People hiding money overseas are increasingly being caught by the UK tax authority, which has sharply increased revenue from undeclared offshore assets in the past year.
In the 2018-19 financial year, HM Revenue & Customs’ offshore, corporate and wealthy unit netted £560m from investigations into British taxpayers with offshore assets and income, up from £490m in 2017-18; a 14 per cent increase. The data also revealed a 72 per cent increase in tax collected since 2016-17 when £325m was raised.
The figures were obtained from a Freedom of Information request by Access Financial, a payroll and tax compliance company.
It revealed that 827 investigations were launched in 2018-19 by the OCW unit, which was founded after the 2015 “Panama Papers” leak of 11.5m documents related to offshore entities in the Central American country. The unit, part of HMRC’s fraud investigation service, targets wealthy individuals and businesses with undeclared offshore interests and is staffed by lawyers and accountants.
The unit’s increased collection occurred despite a reduction in the number of investigations from 839 in 2017-18 and 842 in 2016-17.
Kevin Austin, chief executive of Access Financial, said: “HMRC’s new offshore unit is becoming much better at focusing its resources on the biggest tax threats. Gone are the days when taxpayers who frequently worked or owned assets in different countries were able to slip between the cracks.”
HMRC has also benefited from greater international co-operation on tackling tax evasion. Since last year, banks, insurance companies, brokers, collective investment vehicles and funds in more than 100 countries have had to share financial data without account holders’ permission under a global initiative developed by the OECD.
“[HMRC’s] unit is sifting through huge amounts of data, including information on bank accounts from offshore financial centres such as the Channel Islands, Bermuda and the British Virgin Islands,” said Mr Austin.
HMRC said the OCW unit’s role was to “ensure no one was beyond our reach and to tackle the most serious and harmful frauds”, adding that “as FIS has developed, we have been successful in increasingly working more complex and higher value cases”.
Lucy Brennan, a partner at Saffery Champness, an accountancy firm, added that HMRC had been sending letters to individuals with offshore income to cross-check their intelligence with self-assessment tax returns.
“It is perfectly legitimate to have offshore assets generating income and gains, provided all income and gains, including those that generated the funds used to buy the assets, are reported to HMRC,” she said. “Compliant taxpayers should have nothing to worry about by HMRC’s letters asking them to confirm they have put all income on their tax returns.”
Steven Porter, head of tax investigations at law firm Pinsent Masons, said the increased tax revenue should be seen as a success for HMRC.
“There have been lots of initiatives in the past where they’ve tried to get to offshore assets that they think tax is due on,” he said. “But as soon as the reporting [of assets] has been shifted from individuals to organisations, we have seen an increasing trend of tax.”
Mr Porter said the amount of tax HMRC collects from offshore assets should continue to increase over the next few years as it continues to improve its data-mining.
However, Dawn Register, tax dispute resolution partner at accountants BDO pointed to tax gap figures published by HMRC last week which showed tax evasion remained a problem. HMRC reported that an estimated £5.3bn was lost to tax evasion in 2017-18.
