Additional UK tax take from well-paid foreign City workers jumps 27% in one year

Out-Law News | 06 Oct 2014 | 3:24 pm | 1 min. read

The amount of additional tax collected by a specialist HM Revenue and Customs (HMRC) team targeting wealthy foreigners living in the UK increased by 27% to reach a new record last year, according to figures obtained by Pinsent Masons, the law firm behind Out-Law.com.

The figures show that investigations and other compliance work by HMRC's Personal Tax International team yielded £153.6 million in additional revenue in 2013/14, up from £120.8m in 2012/13. The team's annual tax take from individuals including highly-paid foreign workers, such as overseas staff working in investment banking and hedge funds, is now 62% higher than it was just five years ago, according to the figures.

Tax expert Ray McCann of Pinsent Masons said that the figures showed that HMRC was investing heavily in those tax investigations that focus on potentially high-yielding areas. Highly-paid foreign workers were also at risk of tax compliance failures due to the complexity of rules in this area, he said.

"Investment bankers and other well-paid City staff have always been a prime target for HMRC because they tend to bring in significant compliance yield for the Revenue," he said. "HMRC knows it is an area where businesses and individuals often make mistakes: the rules are complicated, and businesses need to understand both the law and HMRC practice to avoid making costly mistakes."

"With the increased pressure to try and boost its revenue, it comes as no surprise that HMRC is continuing to target wealthy expats and the better off generally, many of whom work in investment banking and hedge funds with generous pay and bonuses. The fact that HMRC's increase in yield is against the tide of overall falls in remuneration for investment bankers shows how successful they are being in this area," he said.

HMRC's Personal Tax International, or 'expat', team deals with the tax affairs of international assignees and their UK resident employers. These cases tend to require specialist attention because they may involve complex and substantial remuneration packages, while the individual's personal tax liability may depend on whether the employer meets some or all of their tax liability and on the interpretation of tax treaties between different countries.

"It's easy for expats to make mistakes on their tax returns because they haven't fully understood the tax rules in the UK," said McCann. "They may also have income from investments in other countries, or even overseas tax liabilities that all need to be properly documented and accounted for to HMRC. Often it is the employer that makes a mistake, and in many cases it is possible that the employer has to pick up the bill."

McCann said that HMRC's reach was continuing to grow given recent heavy investment into new sophisticated data systems, making it more important than ever for these individuals to ensure that their tax affairs were up to date.

"It is well worth expats ensuring that their tax arrangements are properly reviewed, otherwise they risk an aggressive investigation into their tax affairs," he said.