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You may have asked yourself, “Can HMRC chase me abroad?”, and it’s a common fear of 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.
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.
A Mutual Legal Assistance Treaty is an agreement between two countries that lets you gather information from overseas bodies and authorities to assist a criminal investigation.
If you scarpered to America, for example, with an unpaid tax bill, the UK and US would enact mutual legal assistance to chase you for it.
An international Letter of Request (LOR) is sent – which sounds exceedingly official – to kick off the process of the foreign authorities cooperating.
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.
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.
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.
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.
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.
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.
If you are thinking of appealing, make sure that you are eligible:
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.
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.