UK: 31% rise in offshore-related nudge letters sent by HMRC

As published on: international-adviser.com, Tuesday 26 September, 2023.

HM Revenue & Customs (HMRC) made the highest number of requests to foreign tax authorities for information on UK taxpayers in five years in 2022, according to data obtained by accountancy firm Price Bailey.

The data, which was released under the Freedom of Information (FOI) Act, reveals that HMRC made 620 data requests to foreign tax authorities in 2022, nearly double the number in 2021 (322), and the highest number since 2018.

HMRC also issued 23,936 nudge letters in relation to offshore matters in 2022/23.

This represents a 31% increase on 2021/22, when 18,260 such letters were issued.

According to Price Bailey, the latest figures show a resurgence in activity by HMRC in its campaign against taxpayers with undisclosed income or gains offshore after many years of declining activity.

Price Bailey said that taxpayers in receipt of one of these letters should engage with HMRC to either explain why they are tax compliant or else to make a voluntary disclosure under the Worldwide Disclosure Facility.

The firm added that under extended offshore assessment rules, HMRC can presently raise discovery assessments on offshore income or gains going as far back as:

  • 2013/14 if a careless error was made in a filed return;
  • 2015/16 even if the error was innocent since the taxpayer had taken reasonable care in filing the return or had a reasonable excuse for not notifying HMRC of the income or gains and filing a tax return; and
  • Up to 20 years if the taxpayer made a deliberate error on a submitted return or else did not have a reasonable excuse for not notifying HMRC of the income or gains and filing a tax return.

‘Immense pressure’

Andrew Park, partner at Price Bailey, said: “HMRC is clearly stepping up activity targeting taxpayers with undeclared income or gains. This comes after several years of declining compliance focus on this area, which may have lulled taxpayers into a false sense of security.

“There was a flurry of action in this area around the time of the global financial crisis during which much of the low hanging fruit was picked. It will therefore likely surprise many people that the number of requests to foreign tax authorities hit the highest level in five years last year and that there has been a resurgence in the nudge letter campaign.

“The world of offshore secrecy is now largely a thing of the past. Anyone receiving one of these letters should seek urgent specialist advice. If not dealt with promptly, matters could escalate and dealing with it properly will significantly mitigate the potential liabilities.

“HMRC is clearly under immense pressure to maximise tax revenues. While the number of people wilfully concealing offshore accounts on which they should be disclosing income and gains, or entering into contrived tax avoidance schemes involving offshore structures, has diminished, there is residual non-compliance which is subtle and much more difficult to tackle.”



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