Bloomberg News

U.K. Tax-Office Team to Target Rich With Property Overseas

October 31, 2011

(Updates with BDO comment starting in fifth paragraph.)

Oct. 31 (Bloomberg) -- A 200-member team from Britain’s tax agency is seeking to target wealthy U.K. taxpayers who own and benefit from real estate overseas.

The HM Revenue and Customs “Affluent Team” will mine data to identify people who own properties abroad that they don’t appear able to afford on their declared income as well as those who fail to tell tax officials about any income or gains.

“With HMRC’s increased capability and expertise, and its increasing success in tackling evasion both at home and offshore, the message is clear: there is no hiding place for tax cheats,” Treasury minister David Gauke said in an e-mailed statement in London today. “We allocated HMRC 917 million pounds ($1.47 billion) to reduce the tax gap over the next four years in the last spending review. This new team is part of that investment.”

The team also plans to seek out tax evasion by commodity traders and people with offshore accounts, HMRC said in the statement, without giving further details.

“We have advised a number of clients who have undeclared rental income and gains from foreign property so, given its current focus on offshore tax evasion, it makes sense for HMRC to focus on this particular area,” said Fiona Fernie, a tax investigations partner at accountancy firm BDO in London.

‘Middle-Income Taxpayers’

“Whilst HMRC’s ‘affluent team’ is aimed largely at the wealthiest U.K. residents, it’s also likely that middle-income taxpayers could get caught out if, for example, they own a holiday home abroad and their tax affairs are not in order,” Fernie said in an e-mailed statement.

Homes abroad are often bought with money inherited from parents or relatives who have died, said Charles Weston Baker, head of international residential real estate at London-based property broker Savills Plc.

“To brand people tax cheats because they own homes abroad isn’t the right approach,” Baker said by phone. “If assets abroad are not related to incomes there can be a good reason for that. There’s a lot of inherited money spent on properties abroad, which is completely valid.”

The U.K. government has been increasing its scrutiny of the wealthy, including those with foreign assets, as it clamps down on tax evasion and seeks to narrow its budget deficit. HMRC said Oct. 13 it was writing to HSBC Holdings Plc account holders in Geneva suspected of failing to report all their income and gains.

--Editors: Eddie Buckle, Andrew Atkinson.

To contact the reporters on this story: Thomas Penny in London at tpenny@bloomberg.net; Chris Spillane in London at cspillane3@bloomberg.net.

To contact the editors responsible for this story: James Hertling at jhertling@bloomberg.net; Andrew Blackman at ablackman@bloomberg.net.


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