HMRC yield from enquiries into taxpayers with offshore assets surges

HMRC yield from enquiries into taxpayers with offshore assets surges to £684,298 per enquiry.

The amount per enquiry nearly doubles since 2016/17. Higher fines and more sophisticated data analytics leading to behavioural change among taxpayers

The amount of tax collected per enquiry into wealthy taxpayers with income and/or assets offshore has almost doubled in the last three years to £684,298 per enquiry, according to Price Bailey, the Top 30 accountants.

Price Bailey obtained data from HM Revenue & Customs (HMRC) under the Freedom of Information Act, which revealed that £414 million was identified from 605 investigations in 2019/20 (£684,298 per enquiry) compared to £325 million from 842 investigations (£385,786 per enquiry) in 2016/17. The data represents the work of the Offshore, Corporate & Wealthy unit, which sits within the Fraud Investigation Service at HMRC.

Price Bailey points out that the absolute number of enquiries and tax identified fell from a high of 827 and £560 million respectively in 2017/18. The reason for the falling number of enquiries and the amount of tax collected is likely a result of taxpayers modifying their behaviour due to much more punitive fines (up to 300% of the tax due for those with undeclared assets/income offshore), combined with HMRC’s use of big data, which is likely leading to behavioural change.

Jay Sanghrajka, Tax Partner at Price Bailey, comments: “While the number of enquiries has fallen to the lowest level in four years, the yield per enquiry has jumped by more than three quarters. HMRC is becoming much better at identifying and challenging the worst offenders by using Connect, a data matching and risking tool, that allows it to cross match one billion HMRC and third-party data items. This enables it to target the most non-compliant taxpayers with greater accuracy, which has pushed the yield per enquiry ever higher.”

“A new source of information for HMRC has been the Common Reporting Standard (CRS) launched in 2017 by the OECD which has increased transparency with over 100 countries participating in automatic exchange of information on taxpayers.”

“HMRC’s offshore unit is staffed by highly experienced lawyers and accountants and 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. HMRC is able to use its algorithms to analyse vast amounts of personal and commercial information and establish links between individual taxpayers and businesses, income, assets and transactions.”

“Those caught out by HMRC will pay considerably more in penalties on top of the tax due. This is because HMRC can charge an increased penalty where the income or asset that gives rise to the penalty is held outside of the UK. Penalties of up to 300% of the amount of the outstanding tax can be imposed where the taxpayer has moved assets to avoid having details reported to HMRC under international agreements.”

“The ramping up of penalties for offshore non-compliance and the introduction of a strict liability offence making it a criminal offence to fail to declare offshore income over £25,000, together with HMRC’s greater use of big data analytics, is likely to have encouraged behavioural change. Taxpayers who may have hidden assets and income arising offshore only a few years ago are now more likely to think twice.”

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About Price Bailey

Price Bailey is a top 30 accountancy practice specialising in providing accountancy, tax and business advice to enable the growth of regional, national and international businesses. In addition to traditional accounting services, the firm has a range of specialists in many areas which combine to provide a complete, integrated business offering. These include tax consultancy, corporate finance, strategic planning, insolvency & recovery and employment law.

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Paul Arvanitopoulos
Aggelos Consulting
Tel: 020 3700 9141
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