Expat contractors twice as likely to face HMRC scrutiny

British contractors working abroad are coming under closer scrutiny from HMRC, as it has more than doubled its requests for data to foreign tax authorities, says Access Financial.

The payroll and accountancy firm said the Revenue made 1,085 requests to its tax authority counterparts overseas for details on expat contractors in 2016, compared with 499 in 2015.

Obtained by the firm under the FoI act, the full dataset shows requests from HMRC’s Mutual Assistance in the Recovery of Debt team have actually quadrupled -- from just 266 in 2014.

But it also receives more data automatically due to a series of global tax transparency tie-ups, helping elevate the team’s haul in 2016 having probed the 1,085 taxpayers to almost £2million, equating to £1,833 per expat.

“Historically, there was a widespread view that tax authorities seldom acted in a joined-up way and so it was easy to slip between the cracks,” said Access Financial boss Kevin Austin.

“[But today] HMRC has the power to instruct foreign tax authorities to collect tax on its behalf and vice versa, and is increasingly asking its European counterparts to pursue expats with bills for disputed tax.”

Austin believes that a “a significant proportion” of British contractors working abroad (now or very recently) are “likely to have not paid the correct amount of tax.”

“Despite what their promoters may claim, some complicated tax avoidance structures will turn out to be non-compliant, so even where people haven’t deliberately sought to hide their money, they may be caught out.”

This summer, the Global Reporting Standard (GRS) launched, allowing the first automatic tax information exchanges to take place last month between most EU countries, the Crown Dependencies and overseas territories.

In addition, information on taxpayers with accounts based in another 50 jurisdictions, including Switzerland, Monaco and Singapore, will begin to be exchanged in September 2018.

Austin reminded: “HMRC never endorses schemes, and even if a scheme operates for years, HMRC can at any point decide that the scheme is non-compliant, which can leave contractors exposed to large sums in backdated tax, interest and penalties.

“Some offshore schemes promise contractors that they can retain up to 90% of their income. Contractors tempted by these schemes need to clearly evaluate the risks, which are much greater now than they have been in the past. As a rule of thumb, if a scheme sounds like it’s too good to be true, it probably is.”

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Written by Simon Moore

Simon writes impartial news and engaging features for the contractor industry, covering, IR35, the loan charge and general tax and legislation.
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