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Wednesday, February 1, 2023

UK admits it has no thought how a lot tax is being evaded by way of offshore belongings

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The UK tax authority has admitted it has no thought how a lot tax is being evaded by UK residents holding cash offshore, after new figures revealed a whole lot of billions of kilos was held in tax havens.

HM Revenue & Customs disclosed in freedom of knowledge requests that UK residents had £850bn in monetary accounts abroad — of which £570bn was primarily based in tax havens — in 2019, the most recent yr HMRC has launched statistics for.

The figures come from monetary knowledge that has been shared with HMRC by greater than 100 nations since 2017, underneath worldwide guidelines referred to as the Common Reporting Standard (CRS).

But when requested if HMRC had used the CRS knowledge to estimate what quantity of UK residents had correctly reported their abroad accounts, HMRC mentioned it had not.

“We have not produced or received any estimates, analysis or statistical information as to what proportion of the foreign financial accounts have been ‘properly disclosed’, nor can this be accurately inferred in the data we hold,” HMRC mentioned in its replies to the FOI requests.

Some account info shared underneath the CRS was not taxable within the UK, the responses to the FOI requests added.

But tax consultants criticised HMRC’s stance, warning it despatched the incorrect message to folks in search of to evade tax.

Dan Neidle, founding father of Tax Policy Associates, a think-tank which made the FOI requests, mentioned it was “astonishing” HMRC had not been in a position to provide you with an estimate of how a lot of the £570bn had been undeclared.

He argued that “in most cases it should be straightforward for HMRC to automatically cross-check tax returns” — which require people to declare their offshore accounts — with the CRS knowledge to establish tax cheats and use the end result to create an approximate estimate for offshore tax evasion.

“This is great data, but what’s the point of this information if it’s not being used?” mentioned Arun Advani, assistant economics professor on the University of Warwick. “It highlights the resourcing constraints HMRC are under.”

Given the £850bn held offshore represented round 6 per cent of the UK’s complete web family wealth of £14.6tn, HMRC needs to be doing extra to verify it, Advani mentioned.

Alex Cobham, chief government on the Tax Justice Network, a strain group which campaigned for the CRS for years earlier than its introduction, criticised HMRC for “an outright dereliction of duty”.

Senior tax lawyer Jolyon Maugham mentioned “the disinclination of HMRC to take a proper interest in the deep pools of offshore money held by the mega-rich is, I am afraid, a longstanding problem and one that requires some explaining”.

HMRC rejected claims it was not utilizing or checking the information, saying it used CRS knowledge to “systematically compare” it to UK tax information and knowledge, earlier than deciding what compliance response to take.

Compliance ranged from sending nudge letters telling folks to verify their tax to felony investigations.

“The CRS provides us with more of the critical information we need for our compliance activity and is playing a major role in helping us to tackle tax evasion and avoidance,” HMRC mentioned.

Since 2017/18, the tax workplace had introduced in £570mn in tax due to computerized trade agreements, together with the CRS, it added.

When requested why it had not made any estimates of individuals doubtlessly evading tax by not declaring offshore accounts correctly, HMRC mentioned its knowledge was restricted.

“The CRS data contains millions of records and is just one of many data sets we have access to. Not all of the worlds’ jurisdictions are signed up to CRS and we could not say with certainty whether each account was properly disclosed. We would not publish a figure where we did not have certainty that [it] is accurate.”

HMRC added that among the UK residents’ accounts could also be owned by people who find themselves non-domiciled within the nation, and subsequently not topic to UK tax. But it couldn’t give a share as to how lots of the 1.2mn accounts in tax havens in 2019 have been owned by non-doms.

Tim Stovold, companion at accountancy agency Moore Kingston Smith, mentioned he suspected a lot of the accounts in tax havens have been held by non-doms, including that the UK regime “positively encouraged people to keep money overseas”.

Source: www.ft.com

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