UK taxman may dig deeper into expat banking and investment earnings

by Ray Clancy on November 7, 2014

Expats working for investment banks, private equity firms and hedge funds can expect the UK taxman to probe deeper into their financial affairs in the coming years.

Tax investigations into expats working as investment bankers or fund managers in the UK yielded record revenue in 2013/2014, and enforcement activity is expected to increase, according to law firm Pinsent Masons.

us expat taxes

Law firm Pinsent Masons says the UK taxman may focus its attention on high-earning British expats in banking and finance

Pinsent Masons said that HMRC’s Expat Team had raised GBP153.6 million in the last financial year, a 27% increase on the previous financial year and despite a decline in bonuses for people working in the City of London.

The firm believes that in order to meet challenging revenue targets, HMRC will continue to invest heavily in investigations that will focus on high earners, such as overseas staff working in investment banking, private equity, and hedge funds.

Ray McCann, a Partner at Pinsent Masons, said that the complicated tax affairs of these professionals and a lack of familiarity among expats with UK tax rules could lead to them making mistakes on their tax returns.

He pointed out that ‘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’.

But the expats may not have to fork out for extra tax. ‘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,’ he explained.

He also pointed out that 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.

Meanwhile, British people who move overseas leaving a pile of debts behind are not beyond the reach of the taxman. HMRC has Mutual Assistance in the Recovery of Debt agreements with many countries.

Details of how unpaid tax debts affect expats are listed in HMRC’s Insolvency Manual, which is the in-house guidance for tax inspectors. ‘We can and do ask tax authorities in other countries to claim money owed to us in the UK off expats living under their jurisdiction,’ said an HMRC spokesman.

‘We also offer a reciprocal service for other authorities with debtors who are now living in Britain, the spokesman added.

Other debts, such as loan or mortgage arrears, unpaid credit card balances and even student loans can also follow expats around the world. However, private companies generally find chasing down a debt harder than HMRC.


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