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HMRC chasing expats for back taxes due on disguised remuneration loans
| Published: | 22 Feb at 6 PM |
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The British taxman is now chasing expats for back taxes due because of a rule change on disguised remuneration loans.
Almost 2,000 unhappy expats have now received income tax demands related to disguised remuneration loans taken out almost 20 years ago. Some 50,000 active cases are now being investigated, with expats being sent awareness letters by HMRC in an attempt to recover around £3.2 billion in unpaid taxes. The regulator has already agreed payments totalling £1 billion in unpaid income tax and national insurance contributions involving companies as well as individual traders.
In the past, many contractors set up means of paying themselves extra by taking out tax-free loans from their businesses without any intention of ever paying back the money. However, updated income tax rulings has resulted in the loans being dragged back into the system, leaving the borrowers liable for tax on amounts considered as earnings. According to HNRC, the arrangements were simply a form of tax and national insurance contribution avoidance scheme as the moneys were taken as loans with no intention of repayment and used as salaries.
British expats now living in around 70 world countries have been contacted, but HNRC is fully aware the majority of the tax owed will be impossible to recover due to the difficulty of enforcing UK laws in foreign courts. The majority of those targeted are now living in Australia, which has reciprocal tax collection agreements with the UK. Also in the taxman’s sights are expats in New Zealand, Switzerland, Canada, South Africa, Ireland, the USA, Singapore and Poland, with HMRC telling the media they are actively encouraging defaulters to come forward using tweets and other IT-based means of communication.
Almost 2,000 unhappy expats have now received income tax demands related to disguised remuneration loans taken out almost 20 years ago. Some 50,000 active cases are now being investigated, with expats being sent awareness letters by HMRC in an attempt to recover around £3.2 billion in unpaid taxes. The regulator has already agreed payments totalling £1 billion in unpaid income tax and national insurance contributions involving companies as well as individual traders.
In the past, many contractors set up means of paying themselves extra by taking out tax-free loans from their businesses without any intention of ever paying back the money. However, updated income tax rulings has resulted in the loans being dragged back into the system, leaving the borrowers liable for tax on amounts considered as earnings. According to HNRC, the arrangements were simply a form of tax and national insurance contribution avoidance scheme as the moneys were taken as loans with no intention of repayment and used as salaries.
British expats now living in around 70 world countries have been contacted, but HNRC is fully aware the majority of the tax owed will be impossible to recover due to the difficulty of enforcing UK laws in foreign courts. The majority of those targeted are now living in Australia, which has reciprocal tax collection agreements with the UK. Also in the taxman’s sights are expats in New Zealand, Switzerland, Canada, South Africa, Ireland, the USA, Singapore and Poland, with HMRC telling the media they are actively encouraging defaulters to come forward using tweets and other IT-based means of communication.
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