Expats switching cash from Britain offshore with money transfer services will soon have their transaction reported to the tax man. Under a new initiative, HM Revenue and Customs (HMRC) intends to demand any money service firm dealing with foreign currency exchange should report the details of the transaction.
The aim is to stop expats and businesses from switching cash out of the UK without declaring any earnings or interest for tax. In a consultation document, HMRC has explained that new regulations imposed on money service providers will plug a hole allowing tax avoidance.
Hidden economy crackdown
HMRC believes taxpayers working in the hidden economy are manipulating money service companies with series of transactions that are seemingly small amounts, but add up to much larger untaxed sums being moved out of the country.
“HMRC acknowledges that many customers are likely to conduct one-off, relatively low-value transactions through a money service business,” an HMRC spokesman said.
“The aim of this proposal is to allow HMRC to discover the aggregate activity of money service business customers. This will help to identify where more significant amounts of money, which may have been earned in the hidden economy, have been transacted through a money service business.”
“This data would include identifying details of money service business customers, such as names and addresses, or the registration number and registered address of business customers.
Expat landlords under threat
“It would also include data relating to the number and aggregated value of transactions by the customer through the money service business, and may include other details related to the transactions,”
The measure is designed to catch small business, such as expat landlords, who face exposure if they transfer rents paid in cash out of the UK to a foreign bank or money transfer account. The intention is to feed the transaction data into digital tax accounts so any earnings are taxed.
Financial secretary to the Treasury Jane Ellison said: “Our message to those operating in the hidden economy is clear – it is getting harder to hide your activities, come forward before HMRC catches up with you and join the vast majority of businesses that pay their fair share of tax.”