Expat Task Force Boost Tax Take from City Workers

Lisa Smith, BA (Hons), CeFA

Tax inspectors are clawing more money from foreign workers in the City of London even though their bonuses have taken a dive.

HM Revenue & Customs has grabbed an extra £117.2 million in tax from compliance investigations by an expat task force – an increase of 23% compared with the £95 million tax collected two years ago and £110.8 million a year ago.

The data was gathered from a freedom of information inquiry by lawyers Pinsent Mason, who say that foreign workers in the UK, like investment bankers, overlook basic tax rules because they are not familiar with the laws here.

Tax traps for expats

The firm’s director Ray McCann 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.”

“The tax system here in the UK contains many traps for the unwary, so it can be particularly tough for expats to try and navigate and for those without a particularly sophisticated knowledge of UK tax system there are plenty of potential pitfalls since UK rules can be quite different from those in other countries.”

The firm revealed that well-paid City workers are under closer scrutiny HMRC, leading to more expats in banking and financial services sector coming under investigation for failing to pay the correct tax.

Tax planning schemes

“There are extra tax headaches for expats living in the UK, compared to British citizens. They may have property or other investments in their native country, for example and many leave it too late before they seek professional advice and end up paying the price when HMRC catches up with them,” said McCann

“Remittances – the movement of an individual’s funds from one country to another – are a particular problem for expats. 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.”

HMRC is also targeting expats who have joined tax planning schemes offered by banks and hedge funds to help them manage their tax, including employer-financed retirement benefit schemes.

Leave a Comment