The UK tax office made 1,096 information requests to overseas tax authorities in the last year, rising from just 569 requests in 2012, and a 7% uplift from 1,025 in 2015, according to the figures.
These requests were made under ‘direct tax instruments’ including bilateral double taxation agreements, bilateral tax information exchange agreements and OECD information exchange agreements, all of which allow tax authorities to exchange information on taxpayers cross-border on request.
Pinsent Masons tax investigations expert Paul Noble said high profile cases, including those linked to the ‘Panama Papers’ leak of April 2016, have added public pressure to HMRC to pursue those suspected of hiding income and assets offshore.
“Enlisting the assistance of foreign tax authorities in tax investigations is a powerful weapon in HMRC’s arsenal – one that it is not hesitating to use in its pursuit of suspected tax evaders,” he said.
Noble pointed to a sizeable number of UK-based high net worth individuals and businesses with complex tax affairs across multiple jurisdictions as likely to come under more scrutiny.
“Now is certainly the time for those with tax irregularities involving overseas income and assets to correct any historical non-compliance, as draconian penalties of between 100% and 200% of any unreported tax will bite after 30 September 2018,” he said.
A number of new initiatives have been introduced in recent months in order to make it easier for tax authorities in different jurisdictions to share information on tax avoidance and evasion between each other.
The UK now automatically receives information about taxpayers in the Crown Dependencies and British Overseas Territories with tax authorities in those jurisdictions and exchanges information in return, while the OECD’s Common Reporting Standard (CRS) introduces similar arrangements at a global level.
Tough new penalties
Pinsent Mason also highlighted tough new penalties being introduced from 30 September 2018 for those that have made errors in their UK tax returns relating to ‘offshore tax matters’.
Ahead of this, a new legal obligation will give taxpayers a final opportunity to correct any returns that fail to properly report offshore matters that would give rise to a UK tax liability.
The new penalty will start at 200% of the tax liability. It can be reduced to 100% of the tax liability, but no lower. In addition, in the most serious cases a further penalty of up to 10% of the value of the relevant asset can also be imposed and HMRC will be able to ‘name and shame’ on its website.
