INVESTIGATIONS into highly paid foreign City workers living in the UK have yielded record revenues, according to data obtained by law firm Pinsent Masons.
The operations generated around £121m in 2012/13, up from £117m despite the fact that the squeeze on investment banking profits meant that City bonuses declined dramatically, down from an estimated £4.4 billion during the 2011 ‘bonus season’ to £1.6 billion for bonuses paid out during the 2012/13 bonus round.
Some features of expat packages have particularly caught the eye of HMRC. For example, the use of dual contracts, which assign an element of an individual’s income to a contract for work done overseas, were outlawed in the Autumn Statement.
Complicated tax affairs and lack of familiarity with the UK rules can mean that expats make more mistakes with their tax returns, making them a lucrative target for HMRC.
Pinsent Masons partner Ray McCann said: “With ambitious targets to meet in terms of bringing in more revenue, it is no surprise HMRC continues to see what is a highly paid but relatively small group of individuals as offering maximum rewards in terms of tax take for much less effort.”
“Most of these foreign employees work for the biggest investment banks and hedge funds. They are internationally mobile and tend to be at the upper scale of pay rates, often benefiting from more than usually sophisticated bonus arrangements and complex employment agreements.”
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