HMRC tax evasion assistance requests double in five years

Requests made from HMRC to foreign governments for assistance with suspected tax evasion cases have almost doubled in the past five years, according to research from law firm Pinsent Masons.

In 2012, HMRC made 591 requests to foreign governments. In 2016, this number stood at 1096, a 7% increase on 1025 requests made in 2015. Pinsent Masons said one key reason behind the increase was mounting public pressure on HMRC to target individuals suspected of committing offshore tax evasion following high-profile cases, such as the Panama Papers scandal.

The requests have been made under bilateral agreements, such as double taxation agreements and tax information exchange agreements, which enable the cross-border exchange of taxpayer information between tax authorities worldwide. This information transparency has been supported by a number of OECD initiatives, including a new multilateral instrument that was adopted in 2016 and has since been signed by more than 60 jurisdictions.

Paul Noble, head of tax investigations at Pinsent Masons, said: “Enlisting the assistance of foreign tax authorities in tax investigations is a powerful weapon in HMRC’s arsenal – one that they are not hesitating to use in their pursuit of suspected tax evaders.

“Since the Panama Papers leak two years ago, the issue has been pushed to the forefront of HMRC’s agenda – this is reflected in the internationally agreed legislation to increase sharing of information.

“A sizeable number of UK-based high net worths and businesses will have complex tax affairs across multiple jurisdictions. As the amount of information available to HMRC increases, they are 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.”

Related reading