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The number of people in the UK admitting they do not pay tax on their overseas assets rose by almost a quarter in 2023-24, according to government figures.
A total of 5,643 people admitted not paying enough tax on their overseas assets to HM Revenue & Customs, up from 4,630 in 2022-23 – a rise of 22 percent – according to data released under a freedom of information request showed.
The government has promised to raise billions of pounds by cracking down on tax evasion and avoidance HMRC The budget provided funding for 5,000 additional compliance officers.
Tax experts said the rise in tax evasion disclosures was due to several factors. This included HMRC sending a greater number of warning letters, obtaining data from more countries about people’s offshore affairs and increasing public awareness of data sharing.
“HMRC’s aggressive pursuit of tax avoiders now leaves very few places to hide,” said Graham Caddock, head of tax investigations at Lubbock Fine, the consultancy that made the FOI request.
He added that the tax agency “makes good use of the information it receives from foreign jurisdictions to verify tax return entries and…” . . its database to search for those who are avoiding HMRC altogether.”
Since 2018, international rules have led to the automatic exchange of information about financial accounts between tax authorities. Developed by the OECD and known as the Common Reporting Standard (CRS), these agreements have been signed by 120 countries.
Participating countries include popular tax havens such as Switzerland, Bermuda, the British Virgin Islands and the Cayman Islands. Meanwhile, the information exchange program will be expanded to include crypto asset exchanges starting in 2027.
HMRC uses algorithms to identify anomalies between offshore records and its data on UK residents. The system then generates “nudge letters” that are sent to individuals when discrepancies are discovered.
Dawn Register, tax dispute resolution partner at BDO, an accountancy firm, said she suspects the information HMRC is now receiving is “more accurate and subject to more detailed analysis”. . . using sophisticated AI technology.”
This greater analytical ability was likely one of the factors that led to an increase in tax disclosures.
“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 disclose unpaid tax on foreign assets using HMRC’s global online disclosure facility.
The maximum penalty for failing to disclose offshore income can be up to 200 percent of the tax owed and, in the most serious cases, carries a prison sentence.
Caddock said the risk of penalties was “significantly reduced” for making a disclosure after receiving a push letter.
HMRC estimates that the tax gap – the difference between expected tax returns and what is paid – was £39.8 billion in 2022-23, with around £5.5 billion likely to have been lost specifically to tax evasion.
HMRC estimated in data published earlier this year that the under-declared tax liability of UK residents with foreign income was around £300 million in 2018-2019. The analysis found that around 4 per cent of this group had under-declared their tax liability to HMRC.
