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The number of people in the UK who admitted not paying tax on their overseas assets jumped by nearly a quarter in 2023-24, according to government data.
A total of 5,643 people admitted not paying enough tax on their foreign assets to HMRC, up from 4,630 in 2022-23 – an increase of 22 per cent, data obtained under a freedom of information request showed.
The government promised to collect billions of pounds by combating tax evasion HMRC Funding for an additional 5,000 compliance officers is budgeted.
Tax experts said the increase in tax evasion cases was driven by several factors. This included HMRC sending a greater number of warning letters, receiving data from more countries about people's foreign affairs, and raising public awareness about data sharing.
“HMRC’s aggressive pursuit of tax evaders now leaves very few places to hide,” said Graham Caddock, director of tax investigations at Lubbock Fine, the consultancy that issued the freedom of information request.
He added that HMRC “makes good use of the information it receives from overseas jurisdictions, checking tax return entries and… its database to look 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. These agreements, developed by the Organization for Economic Cooperation and Development and known as the Common Reporting Standard (CRS), 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, starting in 2027, the information sharing program will be expanded to include crypto asset exchanges.
HMRC uses algorithms to identify anomalies between external data records and its data for UK residents. The system then creates “alert messages” that are sent to individuals when discrepancies are detected.
Dawn Register, tax dispute resolution partner at BDO, an accountancy firm, said she suspects the information HMRC now receives is “more accurate and subject to greater analysis . . . using cutting-edge artificial intelligence technology.”
This greater analytical power is likely to be one of the factors leading to increased 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 online global disclosure facility.
The maximum penalty for failure to disclose offshore income can be up to 200 percent of the taxes due, and in more serious cases, imprisonment.
Caddock said filing for disclosure after receiving a warning letter “significantly reduced” the risk of sanctions.
HMRC estimates that the tax gap – the difference between what you expect to collect in tax and what is paid – was £39.8 billion in 2022-23, with around £5.5 billion likely to be lost specifically to evasion.
In data published earlier this year, HMRC estimated that undisclosed tax liabilities for UK resident individuals with foreign income amounted to around £300 million in 2018-19. The analysis found that around 4 per cent of this group had not declared their tax liabilities to HMRC.
