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HM Revenue & Customs’ letter campaign to encourage UK taxpayers named in the Pandora Papers leak to declare overseas income and gains has resulted in just 14 disclosures, according to a new freedom of information request.
Consisting of 11.9mn documents leaked to the International Consortium of Investigative Journalists from 14 offshore financial services companies in 2021, the Pandora Papers was one of the biggest ever leaks of financial information.
It focused on the use of offshore trusts and shell companies by the super-rich and political classes.
Since June last year, HMRC has written to hundreds of UK taxpayers named in the leak.
However, data unearthed by the think-tank TaxWatch via a freedom of information request found the agency had received relatively little information back.
Of 968 so-called “nudge” letters issued by HMRC to individuals named in the papers, the tax office had received 146 responses — resulting in just 14 disclosures of additional income or gains overseas.
“The number of disclosures made to HMRC’s nudge letter campaign is shockingly low so far, and presumably far below HMRC’s expectations when they started work on this last June,” said Claire Aston, director of TaxWatch.
“While it’s too early to know how much UK tax is due on these assets hidden overseas, there’s a public interest in these figures and scrutiny of HMRC’s approach to offshore non-compliance.”
Not all recipients of HMRC’s Pandora Papers letters would have additional income or gains to declare, Aston added, and so not all would have been required to respond to the tax authority.
Nevertheless, she said the response so far raised questions about whether HMRC’s approach, particularly on nudge letters, was working.
After letters were first sent to people named in the papers last year, tax experts reported that HMRC had sent a new round to individuals last month.
According to the Institute of Chartered Accountants in England and Wales, the latest letters asked recipients to check whether they had told HMRC about their UK tax liabilities on all overseas income and gains. They gave recipients a deadline of 60 days to do this — double the length of time originally requested in last year’s batch of letters.
Andrew Park, partner at accountancy firm Price Bailey, described the disclosure figures as “quite shocking”.
“HMRC have not done enough traditional investigation work. They’ve been relying on sending people frightening letters. But those people often still don’t understand they’re not compliant,” he added.
Park’s experience was that there were often things that had been overlooked with offshore arrangements that made them potentially non-compliant.
He said this was often not done deliberately but was due to the complexity of the rules and individuals not updating their arrangements and advice with time as their circumstances changed.
A separate FOI request made by Price Bailey found that HMRC had increased its offshore compliance activity in other areas — with information shared between the department and foreign tax authorities about UK taxpayers at a seven-year high.
The FOI found 2,388 requests for information were made, or received, by HMRC regarding taxpayers with assets in the UK and overseas in 2023-24. This was up from 1,900 requests made or received by HMRC in 2017-18 — when new international rules allowing the automatic exchange of information between tax authorities first started being shared.
The FOI further found HMRC had overall sent 23,500 nudge letters in relation to all offshore matters in 2023-24, not just the Pandora Papers. This was a slight decline on 2022-23 when 23,936 such letters were issued.
However, the monetary value of disclosures resulting from these letters had almost trebled between 2022-23 and 2023-24 from £19.6mn to £57.2mn. Park speculated that it was possible some high-value individual disclosures related to Pandora Papers might have driven the increase.
HMRC said: “We are still in the early stages of our compliance activity and our work, which includes one-to-one inquiries, continues. Our work to tackle offshore non-compliance has secured almost £700mn since 2019.”
