Expats working in the financial sector are easy targets for HM Revenue & Customs (HMRC) and can expect more attention from the tax man.
Table of contents
Industry experts claim HMRC is targeting investment bankers, fund managers and executives at private equity firms as they have found them to be rich pickings in the past.
HMRC clawed back more than £150 million in unpaid taxes from expats workers mainly in the City of London last year.
That represents a 27% increase in reclaimed tax at a time when City bonus payments are shrinking.
Lawyers Pinsent Mason explained one of the main reasons for the underpayment of tax was expat workers in Britain did not fully understand the tax rules, so routinely failed to declare payments or missed filing or payment deadlines.
Ray McCann, of Pinsent Masons, argued expat workers in high-powered jobs often had complex financial affairs including offshore payments that needed to be included on a UK tax return.
“It’s not only the taxpayers who make mistakes but their employers as well,” said Pinsent. “Often the taxpayer is not familiar with the UK tax system and the necessary paperwork that goes with filing a tax return and does not know how to identify or correct these errors.
The firm also points out that the money raised from high-earning expats in the City is only the tip of the iceberg in the recovery of unpaid tax by HMRC.
New tax rules cracking down on avoidance and tougher laws to tackle taxpayers hiding assets overseas has led to a record £3.65 billion in undeclared tax flowing into government coffers this year.
Closing the tax gap
HMRC’s Special Investigations Team was responsible for clawing back most of the money – around £3 billion of the total.
The extra tax revenue closes the UK tax gap by 10%. The tax gap is the difference between how much tax HMRC reckons taxpayers owe and how much cash is actually collected.
“This result should indicate to anyone who still has to own up to undeclared tax that HMRC has the resources and expertise to find them,” said McCann.
“We know that HMRC has taken on extra people and invested heavily in technology in the fight against avoidance and now we are seeing that investment come to fruition and can only expect the team to become more effective and to collect more tax.
“The government has also helped a lot by bringing in new anti-avoidance laws that give an advantage to HMRC instead of the taxpayer.”
Related Articles, Guides and Insights
Below is a list of some related articles, guides and insights that you may find of interest.
Questions or Comments?
We love to get feedback from our readers. So, after reading this article, if you have any questions or want to make comments, send us a message on this site or our social media?