HMRC Chasing Expat Contractors For Unpaid Tax

The British tax man is asking foreign governments to chase down expats working overseas who have failed to pay the right amount of tax.

Almost £6 million was raised for HM Revenue & Customs by foreign tax authorities in 2017.

This was triple the amount raised from British expats in 2016 and a huge increase on the £800,000 collected in 2013, which suggests a change in approach towards collecting debts overseas by HMRC.

HMRC asked foreign tax authorities more than a thousand times for financial information on British expats with each case worth an average tax recovery of £5,664.

The revelation by HMRC also highlighted that the agency’s mutual assistance in the recovery of debt (MARD) team was working with mostly EU tax authorities to trace unpaid tax.

Massive penalties

The firm compiling the data from HMRC, Access Financial, believes expats would have had penalties and interest added to their tax debts to make the sums they repaid significantly higher.

HMRC can charge penalties at up to 200% of the amount due.

Kevin Austin, chief executive of Access Financial, said: “International tax authorities are acting in a more coordinated way, making it increasingly important that British expats receive the right advice and ensure their tax affairs are in order.

“HMRC has stepped up the volume of requests for information on British taxpayers working abroad and is focusing its enquiries on high value targets.

“There is an incorrect assumption that people cease to be tax resident in the UK when they work abroad but very often a UK tax liability will arise on foreign earnings. A significant proportion of British contractors who are working abroad, or have worked abroad recently, are likely to have not paid the correct amount of tax.”

Tax investigations
Austin also explained that the increase in tax inquiries overseas coincided with HMRC receiving the first batch of data under the common reporting standard in September 2017.

Many expat contractors utilising offshore tax strategies may now find they are subject to HMRC investigations, added Austin.

“The promotors of these schemes often claim to have HMRC’s approval, but this is false advertising,” he said.

“If HMRC deems a scheme to be non-compliant, it can demand backdated tax, penalties and interest.”