HMRC withholds figures on overseas tax avoidance by wealthy Britons during election season | Tax & Spending

Tax authorities are under pressure this weekend to release estimates of overseas tax avoidance by the country's wealthiest people, after hiding information in reports released during the campaign.

In June 2022, then-Chief of the Treasury Lucy Fraser promised that HM Revenue and Customs (HMRC) would publish figures on the overseas tax gap, but the figures have been repeatedly delayed. An HMRC report published on June 20 this year, four weeks after the election, estimated the tax gap for the 2022-23 tax year to be $39.8 billion. The tax gap is the difference between the tax that should have been collected and the tax actually paid.

Details of the figures for UK residents failing to declare overseas income have not been released by HMRC. Following guidance for civil servants, it has been concluded that this additional detail on tax gaps should not be released during the election period.

The election guidelines for public officials state that statistical activities should avoid competition with candidates for parliamentary office in order to attract public attention.

The decision to withhold the estimated figures has been challenged by investigative think tank TaxWatch, which says that if HMRC concluded that publishing overseas tax gap figures was too controversial, then other tax gap figures should have been delayed too.

Claire Aston, director of TaxWatch, said: “The major political parties promised in their election manifestos to raise more revenue by closing the tax gap, so this figure should not be understated.

HMRC has been under pressure to estimate the size of the tax gap after figures released by HMRC to independent think tank Tax Policy Associates in September 2021 revealed that UK taxpayers were holding around $570 billion in tax havens. At the time, officials said they had not provided an estimate of the size of the offshore financial accounts that were not properly disclosed.

The Common Reporting Standard, approved by the OECD in 2014, now allows for the automatic exchange of financial information between partner countries to prevent tax avoidance. The standard, which requires almost all UK residents with overseas bank accounts to report balances and interest to HMRC each year, has provided officials with a valuable new information resource.

Steven Porter, head of tax disputes and investigations at law firm Pinsent Masons, said he doubted there would be a goldmine for offshore tax avoidance after the tougher penalties and the promotion of voluntary disclosure facilities. Porter said: “There may be some people who have their heads buried in the sand, but I think they are on the brink of extinction.

He said there may be some existing overseas tax avoidance schemes, but he expected most of them to have been identified by HMRC. The total estimated tax gap for individuals who have filed self-assessment returns was around $2 billion, and the overseas tax gap was likely to be a proportion of that and relatively low, he said.

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Labour has revealed it plans to raise more than £5.2 billion by 2028-29 by reducing tax avoidance and plugging the tax loophole that allows some people who do not live in the UK to avoid paying tax.

The UK tax office said the tax gap, which stood at 4.8% of theoretical UK tax debt in 2022-23, would probably be reduced, but it would be difficult to make any additional marginal gains. It said the revenue lost to tax avoidance in 2022-23 was $1.8 billion, or 0.2% of total theoretical debt. In a briefing last month, it said: “Ambition is laudable, but our advice to politicians of all parties is not to spend money before you raise it.

An HMRC spokesperson said: “We have a strong track record in tackling overseas non-compliance. Since launching our No Safe Havens strategy in 2019, we have secured almost £700 million from overseas initiatives.

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