The number of wealthy UK taxpayers admitting to not paying tax on their offshore income has risen by more than a third (35%) in the last financial year, according to law firm Pinsent Masons.
The number has now reached 4,443.
The data is based on declarations made to the Worldwide Disclosure Facility (WDF), a system which taxpayers can use to confess that they owe money on their offshore assets to HM Revenue & Customs (HMRC).
While using the WDF does not warrant reduced penalties or immunity from criminal prosecution, failure to disclose offshore earnings could result in wealthy taxpayers being fined up to 200% of the amount owed.
But it’s not just the number of people visiting that has increased.
Pinsent Masons said revenue from such disclosures jumped 28% to £56.9m ($75m, €68.2m) in 2020-21, from £44.5m the previous year.
The law firm said the increase was due to a campaign by the tax authorities warning those affected that it receives information from overseas tax authorities via the Common Reporting Standard (CRS).
As part of the initiative, HMRC has sent letters over the past 12 months asking taxpayers to declare that they owe no tax from offshore sources. This prompted those who did not pay taxes to clean up.
Sophie Warren, tax investigation expert at Pinsent Mason, said: “Hiding offshore income from the tax authorities is getting more and more difficult every year. As more countries agree to share information about individuals, the chances of getting caught increase.
“The Common Reporting Standard has been a game changer when it comes to offshore sources of income. Increasingly, HMRC already has all the information it needs to prosecute thousands of people. These warning letters are aimed at really about giving people one last chance to show up and receive a reduced penalty.
“HMRC will seek as many additional sources of revenue as possible to mitigate the impact of the pandemic. Tackling hidden offshore revenue will likely be high on their list of targets. As with any case of unpaid tax, it is always better to take the lead and come forward rather than wait for HMRC to come knocking on the door.
An HMRC spokesman said International Advisor“HMRC has a strong track record of tackling non-compliance overseas, whether that means stopping it by doing international business, providing people with easy ways to get their tax affairs right, or taking strong action against those who intend to break the law.
“The Worldwide Disclosure Facility offers individuals an easy way to correct their tax affairs. Anyone with undeclared offshore tax obligations should come forward and declare them.