UK Ups Tax Yield From Expat City Workers

By Editorial 19 October, 2012

The UK tax authority, HM Revenue and Customs (HMRC), has upped its tax take from investigations into high income foreign workers by 23% over the last two years, according to new figures.

Data obtained by law firm Pinsent Masons shows that HMRC received GBP117.2m (USD189m) in additional yield from its "expat" team’s compliance work in 2011-2012. This was up from the GBP94.9m generated in 2009-2010 and the GBP110.8m in 2010-11.

As Pinsent Masons' Director Ray McCann explained, HMRC is cracking down on high income foreign expats, most of whom work for investment banks and hedge funds. He described these workers as "low-hanging fruit", targeted by HMRC because of the traditionally high yields such investigations can bring. McCann sees the increased tax take as particularly interesting in the wake of the credit crunch and recession, given that City bonuses have been slashed, employment figures reduced and investment banking revenues depressed. He believes that HMRC will have had to put in a lot of extra effort to achieve these figures.

McCann warned that it can be particularly tough for expats to try and navigate the UK tax system, describing it as containing many traps for the unwary. Those without a sophisticated knowledge of the system face a number of potential pitfalls, and the tax affairs of an expat can be intrinsically more complicated than those of a UK citizen. Property and investments in their native country can cause issues, as can the movement of funds from one country to another.

McCann explained: "How an expat uses foreign income or gains can result in a UK tax liability even where the funds do not actually come into the UK, a point that many get wrong so ensuring full compliance can be tricky without the right kind of advice.”

And things could only get tougher. The City is under ever closer scrutiny from HMRC, and Pinsent Mansons is warning that expats in the financial services sector are more likely to come under investigation for underpaid taxes. Tax planning schemes in particular are "now very much under the Treasury’s microscope", McCann emphasized, as are employer-financed retirement benefit schemes. HMRC is likely to "continue to mount a very aggressive challenge to these arrangements", McCann stressed.

Tags: Expatriates | Compliance | Wealth | Tax | Investment | Tax Compliance | Tax Avoidance | Law | Banking | United Kingdom | Tax Authority | Offshore | Professionals | Tax Planning | Revenue Statistics | Services |


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