Tax crackdown

HMRC’s crack team targeting wealthy foreign UK-based workers has pocketed an extra 23% in taxes over the past two years, as the financial affairs of international bankers and hedge fund managers come under closer scrutiny.

The taxman’s ‘expat’ team collected £117.2m in additional yield from compliance work in 2011-2012, up from £94.9 million in 2009 – 2010. HMRC netted £110.8 million in additional tax revenue from its Expat team In 2010 – 2011.

Ray McCann of Pinsent Masons, said:

‘HMRC is really cracking down on highly paid expats, most of whom are working in investment banks and hedge funds. Foreign expats have always been a high yielding target for HMRC, and with the organisation trying to boost its revenue it’s not surprising that they’re targeting low-hanging fruit.’

‘This rise in additional tax take is also interesting given that City bonuses and the number of investment bankers have been slashed since the credit crunch. The Eurozone crises and the economic downturn have really depressed investment banking revenues, so HMRC has had to put in a lot of extra effort to increase its take from these investigations.’

‘Some tax planning schemes that have been a popular way for banks and hedge funds to help their staff manage their tax bills is now very much under the Treasury’s microscope. Other schemes, such as employer-financed retirement benefit schemes, are also under review by HMRC.’

HMRC’s expat task force concentrates on foreign employees working for global firms in the UK, whose contracts often allow them to split their taxable pay between Britain and their home country, enabling them to keep foreign earnings out of the UK taxman’s grasp.

A spokesman for HMRC said:

‘We focus our compliance resources where there is the greatest risk of tax loss. As these figures show this strategy is proving highly effective and ensures expats pay the right tax in the UK, in the same way as anyone else who lives here.’