Saturday 7 March 2020 2:57 pm

HMRC doubles down on undeclared foreign income crackdown

HM Revenue & Customs has doubled down on its campaign against taxpayers with undeclared foreign income.

Thousands of UK taxpayers have received letters in the last fortnight urging them to review foreign assets and bank accounts, and warning false declarations could lead to prosecution.

It follows a trend that started last year as thousands of letters were dispatched by HMRC.

The UK tax authority is seeking to close the country’s tax gap, which stands at 5.6 per cent of tax liabilities according to HMRC’s estimate for 2017/18, equating to around £35bn.

There are a number of ways tax loss occurs, but HMRC is utilising the tightening of international regulation which focuses on undisclosed foreign income.

The department uses data exchanged by 100 tax authorities under the Common Reporting Standard, which was an agreement signed in 2014 to aid probes into offshore tax.

According to the Financial Times, the letter sent to taxpayers says: “We have information that shows you have an interest in overseas property or received overseas income or gains that you may have to pay UK tax on.

“We have received this information through the UK’s tax information exchange agreements with other countries.”

The letter gives recipients a deadline of 25 March to respond, according to the report.

Last year it was revealed that HMRC had raised more than £2.9bn since 2010 by tackling offshore tax non-compliance.

However, tax accountants have criticised the process of sending letters to those who have already declared assets or do not need to.

Criticism has been levelled at HMRC for not carrying out proper checks on the individuals in question before sending the letters, with few cases resulting in extra disclosures being required.

HMRC denied this suggestion.

“We do not send our letters speculatively,” it told the FT.

“All of our work is insight and data-driven, and so if customers have received a letter, our data will have indicated that they have offshore assets or income which does not appear to have been declared. We do check their tax position as part of this body of work.”

Other criticism has been levied at the fact the letter declares as false statement “is a criminal offence”.

HMRC added: “This is a business as usual ongoing campaign, so there [are] likely to be more letters next year.”