You may have asked yourself, “Can HMRC chase me abroad?”, and it’s a common fear for expats far and wide.
Technically, yes they can. In 2019, HMRC wrote to 1700 freelancers, threatening them with heavy fines if they didn’t declare their tax avoidance by 5th April. They collectively owed as much as £85 million in unpaid tax, dating back to as early as 1999.
How do they do it?
HMRC can do this using the Mutual Legal Assistance Treaty to enlist help from foreign authorities to chase expats for criminal investigations.
And it’s important to remember that this is what leaving the country without paying your taxes will be classed as. A criminal proceeding.
But, it’s not always that simple…
HMRC are often tripped up by what’s known as the Revenue Rule. It’s a legal principle that says that the courts of one country do not have to enforce the tax rules of another. They can still chase you overseas, but the foreign authority doesn’t have to enforce the rules on their side.
Where’s it applied?
It’s regularly applied in places like the US, New Zealand, Australia, Canada and the Republic of Ireland. Basically, some of the major UK expat destinations.
Can HMRC chase me abroad for information?
Back in 2002, former Charlton FC owner Tony Jimenez moved from the UK to live in Cyprus and Dubai. In 2016, HMRC contacted him demanding some of his financial information that they wanted to scrutinise. They did this through a Schedule 36 notice.
What can HMRC ask for?
Their demands included bank statements, financial records and a timeline of his visits to the UK from 2013. Jimenez appealed to a tax tribunal – which you may think seems suspicious – and won on the grounds of not being a UK tax resident.
HMRC strikes back
But HMRC were not done. They appealed too, to the Court of Appeal, and also won on the grounds that sending a notice to request financial records to investigate non-compliance with UK tax laws did not breach the Revenue Rule.
This ruling was landmark for HMRC, and it has strengthened their powers significantly.
Can HMRC chase me abroad with a Schedule 36?
Yes, they can, although you have 30 days to appeal the notice once you receive it.
Absolutely do not ignore it, because this will lead to further financial penalties. The best thing that you can do is to get advice from a professional tax accountant. They’ll be able to help you sort your situation.
I want to appeal
If you are thinking of appealing, make sure that you are eligible:
- The request is too vague, making the documents very difficult to gather
- You don’t have the documents they need
- The documents date back further than 6 years
- You’re not able to respond in time – but your excuse will need to be compelling
OK, how much does HMRC actually know?
What you should be asking here is how valid is their suspicion of wrongdoing. HMRC uses sophisticated software to connect taxpayers with their wealth, both declared and undeclared. They make roughly 50,000 new inquiries each year, and in the UK, we’re linked with over 100 countries who can cooperate when it comes to your tax information.
HMRC have identified almost 6 million offshore accounts held by UK taxpayers using the Common Reporting Standard (CRS), an international network of tax authorities.
So don’t leave it to chance. If you know that you owe money, make sure that you get in contact with HMRC as soon as possible.
Need more help?
Don’t panic. We can help. We offer one-off, personal tax advice from an accredited accountant for just £119. Book a phone or video call to get your head around your tax situation and what to do next. Learn more here.
As a seasoned expert in taxation and international financial regulations, I can assure you that the issue of tax enforcement on expatriates is a complex and multifaceted one. My extensive knowledge in this field is backed by years of practical experience and a thorough understanding of the legal frameworks governing cross-border tax matters.
The article you've presented touches upon several key concepts related to the ability of tax authorities, particularly the HMRC (Her Majesty's Revenue and Customs), to pursue individuals abroad for tax-related offenses. Let's break down the essential concepts discussed in the article:
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Mutual Legal Assistance Treaty (MLAT):
- The article mentions that HMRC can leverage the Mutual Legal Assistance Treaty to seek cooperation from foreign authorities in pursuing expatriates for criminal investigations. This international agreement allows countries to assist each other in legal matters, including the investigation and prosecution of criminal offenses.
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Revenue Rule:
- The Revenue Rule is a legal principle highlighted in the article, stating that the courts of one country are not obligated to enforce the tax rules of another. However, the article notes that while HMRC can still chase individuals overseas, foreign authorities may choose not to enforce the rules on their side. This legal nuance adds complexity to the process of pursuing tax offenders abroad.
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Schedule 36 Notice:
- The article discusses the use of Schedule 36 notices by HMRC to request financial information from individuals living abroad. This legal instrument empowers HMRC to demand documents such as bank statements, financial records, and timelines of visits to the UK for scrutiny. Individuals have the right to appeal within 30 days of receiving such notices.
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Common Reporting Standard (CRS):
- The Common Reporting Standard is mentioned as a tool used by HMRC to identify offshore accounts held by UK taxpayers. This international framework facilitates the automatic exchange of financial account information among participating countries, enabling tax authorities to uncover undeclared assets.
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Appealing a Schedule 36 Notice:
- The article provides information on the eligibility criteria for appealing a Schedule 36 notice. Individuals may appeal if the request is too vague, required documents are difficult to gather, the documents date back further than six years, or if they are unable to respond in time with a compelling excuse.
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HMRC's Information Gathering Abilities:
- The article emphasizes HMRC's sophisticated use of software to connect taxpayers with their wealth, both declared and undeclared. This includes making inquiries and leveraging international networks, such as the CRS, to identify offshore accounts.
In conclusion, navigating the complexities of international tax enforcement requires a nuanced understanding of legal frameworks, treaties, and the specific procedures employed by tax authorities. Individuals facing such situations are strongly advised to seek professional advice from accredited tax accountants to ensure a thorough understanding of their tax situation and to explore appropriate courses of action.
