The number of rich UK taxpayers admitting to not paying tax on their offshore income has increased by over a third (35%) in the last financial year, according to law firm Pinsent Masons.
The number has now reached 4,443.
The data is based on declarations made to the Worldwide Disclosure Facility (WDF), a system taxpayers can use to confess owing money on their offshore wealth to HM Revenue & Customs (HMRC).
While using the WDF will not warrant a reduction in penalties or immunity from criminal prosecution, failing to disclose offshore income could see wealthy taxpayers being hit with fines up to 200% the sum owed.
But it is not only the number of people turning themselves in that has increased.
Pinsent Masons said that the revenue from such disclosures jumped by 28% to £56.9m ($75m, €68.2m) in 2020-21, from £44.5m the previous financial year.
International cooperation
The law firm said that the increase is due to a campaign by the taxman warning affected people that it received information from tax authorities abroad via the Common Reporting Standard (CRS).
As part of the initiative, HMRC sent out letters over the last 12 months asking taxpayers to declare they don’t owe any tax from offshore sources. This has prompted those who did not pay tax to come clean.
Sophie Warren, tax investigations expert at Pinsent Mason, said: “Hiding offshore income from the taxman gets harder each year. As more and more countries agree to share information about individuals, the chances of getting caught multiply.
“The Common Reporting Standard has changed the game regarding offshore income sources. Increasingly, HMRC already has all the information it needs to prosecute thousands of people. These warning letters are really about giving people a final chance to come clean and receive a reduced penalty.
“HMRC will be looking for as many additional income sources as possible to mitigate the impact of the pandemic. Going after hidden offshore income is likely to be high on their target list. As with any instance of unpaid tax, it is always better to get on the front foot and come forward rather than wait for HMRC to come knocking.”
Come forward
A spokesperson for HMRC told International Adviser: “HMRC has a strong track record in tackling offshore non-compliance, whether stopping this through leading international activity, providing easy ways for people to correct their tax affairs or by acting strongly against those who are intent on breaking the law.
“The Worldwide Disclosure Facility provides people with a straightforward way to correct their tax affairs. Anyone with undeclared offshore tax liabilities should come forward and declare them.”
