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The number of people in the UK who admitted not paying 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 foreign assets to HM Revenue & Customs, up from 4,630 in 2022-23 – an increase of 22 per cent – data obtained under a Freedom of Information request showed. information.
The Government has promised to raise billions of pounds by cracking down on tax evasion and avoidance, with HMRC given funding for an extra 5,000 compliance officers in the budget.
Tax experts said the increase in evasion detections was caused by several factors. These included HMRC sending out more warning letters, receiving data from more countries on offshore people issues and an increase in public awareness of its data sharing.
“HMRC’s aggressive pursuit of tax avoiders now leaves very few places to hide,” said Graham Caddock, director of tax investigations at Lubbock Fine, the advisory firm that issued the FOI request.
He added that the tax authority was “making good use of the information it receives from foreign jurisdictions, checking tax return records and . . . its database to look for those who are avoiding HMRC altogether”.
Since 2018, international rules have led to the automatic exchange of information on financial accounts between tax authorities. These agreements, developed by the OECD and known as the Common Reporting Standard (CRS), have been signed by 120 countries.
Participating countries include well-known tax havens such as Switzerland, Bermuda, the British Virgin Islands and the Cayman Islands. Meanwhile, from 2027, the information exchange program will be extended to include crypto asset exchanges.
HMRC uses algorithms to identify anomalies between offshore data records and its data on UK residents. The system then generates “push letters” that are sent to individuals when discrepancies are detected.
Dawn Register, tax dispute resolution partner at BDO, an accountancy firm, said she suspected the information HMRC is now receiving is “more accurate and subject to greater analysis . . . using sophisticated AI technology”.
This greater analytical power is likely to be one of the factors driving an increase in tax disclosures.
“Awareness and education about CRS and tax reporting has encouraged more people to come forward and update their UK tax affairs,” she added.
Individuals can discover unpaid tax on foreign assets using HMRC’s worldwide online discovery 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.
Coming forward to make a discovery after receiving a dunning letter “significantly reduced” the risk of penalties, Caddock said.
HMRC estimates that the tax gap – the difference between what it was expected to collect in tax and what is paid – was £39.8 billion in 2022-2023, with around £5.5 billion likely to have been lost specifically to evasion.
HMRC estimated, in data published earlier this year, that the underreported tax liability of UK resident individuals with foreign income was around £300m in 2018-19. The analysis found that around 4 per cent of this group had under-reported their tax liability to HMRC.
