HMRC’s progress using UK taxpayers’ offshore banking data

Posted On: 22 Feb 2021

Amit Puri who leads our Tax Investigations and Disputes practice, provides a further update to the article he wrote for the June issue of the Institute of Certified Practising Accountants (ICPA)  bi-monthly magazine. In that article, and the corresponding article posted on this site, Amit examined HMRC’s Worldwide Disclosure Facility (“WDF”) statistics and asked the question – where are we now?

Since publishing his article, Amit has followed up with HMRC’s Information Office to gain a better understanding for the volume of bulk offshore banking/financial accounts data received in recent years, and to consider further as to what HMRC have been doing with this data?

Remember, the Common Reporting Standard (“CRS”) provided the global framework which underpins newer international financial accounts information exchange agreements, enabling well over 100 jurisdictions to share rich banking data with one another annually and automatically, so without the need to make case specific requests. Few will disagree that this significantly enhances HMRC’s ability to detect offshore tax non-compliance thus potential failures by UK individuals. Although the jury is still out as to whether this was another sledgehammer type policy to crack a smaller nut type of tax risk.

Volume of bulk offshore data

HMRC have confirmed the volume of financial accounts data received automatically under international information exchange agreements, including the CRS, as set out below.

Data in respect of the calendar year Number of accounts (typically lines of data) Approximate number of UK taxpayers*
2016 2,024,647 1,160,000
2017 6,392,744 3,113,000
2018 8,029,377 4,071,000

 

Data in respect of the calendar year 2019 was not available at the time of Amit’s request, this was because it’s typically received by September following the end of the calendar year concerned. It would seem HMRC were still working on the data and not ready to share any details surrounding it.

Unfortunately, HMRC did not provide a breakdown of the data received by territory either, which would have allowed readers to gauge the level of information being sent by each jurisdiction. HMRC considered this information to be exempt from release as it related to the conduct of international relations, and confirmed that a UK government department is not obliged to provide information requested if its release would, or would be likely to, prejudice international relations.

Other information requested

Amit has also sought confirmation as to how many letters had been sent by HMRC to UK residents suggesting a disclosure might be required about their offshore assets/investments. The idea being that this might confirm how many campaigns had been run to send nudge letters out in bulk. Other details were requested too as to the broad types of responses received from the recipients and the types of HMRC follow-up actions.

However, following a review of the paper and electronic records held by HMRC, they confirmed that while they did hold the information requested, detailed knowledge about HMRC’s compliance activities was also exempt from disclosure. Broadly, this exemption applies to information which is held, but the disclosure of which is believed will prejudice the assessment or collection of taxes.

WDF Statistics: a reminder

Year Number of WDF ‘notifications of intent’ to disclose Number of WDF ‘disclosures received’
2016 211 88
2017 4,368 2,833
2018 15,244 8,334
2019 4,468 8,255
2020* 1,459* 1,108*
Total 24,291 19,510

*2020 values are up to 13/05/2020 only

What do these figures tell us? Not much in our view, other than there being almost 25,000 registrations and almost 20,000 submissions by May 2020.

Year Tax Interest Penalties WDF Total
2016 £995,598 £142,590 £106,642 £1,244,831
2017 £25,469,102 £4,510,624 £3,238,601 £33,218,328
2018 £81,267,286 £9,885,174 £9,279,856 £100,432,317
2019 £129,578,030 £20,569,685 £20,774,308 £170,922,024
2020* £8,655,598 £965,446 £3,380,107 £13,001,152
£245,965,614 £36,073,519 £36,779,514 £318,818,652

*2020 values are up to 13/05/2020 only

If nothing else, there would appear to be a significant problem in the number of WDF disclosures made and the considerably larger number of accounts notified to HMRC by other jurisdictions. For example, in 2018 and 2019 a total of 16,589 disclosures were submitted to HMRC, however, looking at the financial accounts reported to HMRC in say 2017 or 2018 we note that the numbers were some c. 3 million and 4 million. That is, the number of UK residents with reportable accounts held in reporting jurisdictions, exponentially eclipsing the number of disclosures made even if we assume they were all prompted by HMRC letters.

Do readers agree that the number of disclosures made look entirely disproportionately low?

From anecdotal evidence within the tax risks sector, we still strongly believe the numbers of disclosures made under the WDF to have been heavily and directly influenced by the volume of informal written prompts (aka ‘nudge letters’) sent by HMRC. Such letters confirm that HMRC have information from other counties, about the recipients’ non-UK financial accounts, and recommend that disclosures be made if appropriate.

Still, we strongly believe that HMRC can do better in this regard, because they have mountains of bulk data about ‘millions’ of such financial accounts, and continue to receive more year on year.

Why aren’t resources being redirected to help UK residents regularise their past and securing revenues for the Exchequer in a less invasive way?

Other valid questions to ask might be:

What aren’t HMRC’s data analysts and campaign managers doing, to enable them to reach more UK residents and attain the results HMRC clearly wanted?

Why go through all the trouble to support the CRS policy and framework internationally and enacting the corresponding legislation in the UK, only to produce limited results?

Perhaps, managing Covid-19 has caused significant delays at HMRC, resulting in nudge letter campaigns to stall? Or, has HMRC used the time to better analyse and soon exploit the bulk financial accounts data? Should we expect an aggressive new campaign?

So many questions…