Rise in offshore tax disclosures

Pinsent Masons report that 867 disclosures of income on which UK tax was due were made in 2018/19, up from just 66 in the previous year. The firm says the unpaid tax was on ‘income or capital gains generated in the UK, usually from property or shares, which is often then held offshore in bank accounts, trusts or companies incorporated in low-tax jurisdictions’.

The rise in disclosures is likely a result of UK legislative changes, bringing a wider group into the UK tax net, including the introduction of the non-resident CGT rules and the various anti-avoidance compliance measures such as the civil and criminal powers to clamp down on advisers who facilitate offshore non-compliance. HMRC’s work analysing rents from UK property where the ownership rights are held offshore has also likely contributed to the rise, according to the firm.

Jason Collins, head of tax at Pinsent Masons, commented: ‘Non-UK residents, including UK expat tax exiles, have been forced to come forward as changes to legislation and HMRC campaigns start to bite. The surge in disclosures last year has provided HMRC an even better understanding of the offshore market / and coupled with increased cross-border data sharing has given HMRC hundreds of new targets for its investigations. Given the pressure the UK’s public finances are under due to the coronavirus crisis, we can expect many of these to be followed up on.’

The top three territories from which disclosures of unpaid UK tax were made in 2018/19 were Jersey (218), Guernsey (145) and Isle of Man (69).