The UK tax authority has admitted it has no idea how much tax avoidance there is from UK residents holding money overseas, after new figures revealed hundreds of billions of pounds were held in tax havens.
HM Revenue & Customs revealed in freedom of information requests that UK residents had £850bn in offshore financial accounts – of which £570bn was based in tax havens – in 2019 , the latest year for which HMRC has published statistics.
The figures come from financial data that has been shared with HMRC by more than 100 countries since 2017, in line with international rules known as the Common Reporting Standard (CRS).
But when asked if HMRC had used CRS data to estimate what proportion of UK residents had correctly reported their overseas accounts, HMRC said no.
“We have not produced or received any estimate, analysis or statistical information as to the proportion of foreign financial accounts that have been ‘properly disclosed,’ nor can this be accurately inferred from the data we hold,” said HMRC in its responses to FOI requests.
Some account information shared under CRS was not taxable in the UK, Freedom of Information requests responses added.
But tax experts criticized HMRC’s stance, warning it was sending the wrong message to people seeking to evade tax.
Dan Neidle, founder of Tax Policy Associates, a think tank behind freedom of information requests, said it was “surprising” that HMRC was unable to estimate the part of the £570bn undeclared.
He argued that “in most cases it should be simple for HMRC to automatically cross-check tax returns” – which require individuals to declare their offshore accounts – with CRS data to identify tax evaders and use the result to create a rough estimate for offshore. tax evasion.
“That’s great data, but what good is that information if it’s not used? said Arun Advani, assistant professor of economics at the University of Warwick. “It highlights the resource constraints that HMRC is under.”
Given that the £850billion held offshore represented around 6% of Britain’s total household net worth of £14.6billion, HMRC should do more to verify this, Advani said.
Alex Cobham, chief executive of the Tax Justice Network, a lobby group which campaigned for the CRS for years before its introduction, criticized HMRC for “an absolute dereliction of duty”.
Senior Tax Solicitor Jolyon Maugham said ‘HMRC’s reluctance to give due attention to the deep offshore money reserves held by the mega-rich is, I fear, a long-standing problem and one that requires some explanations”.
HMRC rejected claims it did not use or verify the data, saying it used CRS data to ‘systematically compare’ it to UK tax records and information, before deciding how to respond to the matter. compliance.
Compliance ranged from sending reminder letters asking people to check their taxes to criminal investigations.
“CRS provides us with more of the essential information we need for our compliance activity and plays a major role in helping us to tackle tax avoidance and evasion,” HMRC said.
Since 2017/18 the tax office has collected £570million in tax due to automatic swap deals, including CRS, it added.
Asked why it had made no estimate of who could evade tax by misreporting offshore accounts, HMRC said its data was limited.
“CRS data contains millions of records and is just one of many datasets we have access to. Not all jurisdictions in the world are registered with CRS and we cannot say with certainty whether every account has been properly disclosed. We would not publish a figure where we would not be certain that [it] is correct.
HMRC added that some of the accounts of UK residents may belong to people not domiciled in the country and therefore not subject to UK tax. But he could not give a percentage as to how many of the 1.2 million accounts in tax havens in 2019 belonged to non-doms.
Tim Stovold, a partner at accountancy firm Moore Kingston Smith, said he suspected most accounts in tax havens were held by non-doms, adding that the UK regime “positively encourages people to keep money abroad”.