Consultation outcome

Preventing and collecting international tax debt – summary of responses

Updated 20 July 2022

1. Introduction

Definitions

In this document, the term ‘international UK tax debt’ refers to the non-payment of UK tax, where either the taxpayer, their assets, or both, are outside of the UK.

This includes UK resident individuals with overseas assets that generate a UK tax liability; individuals based overseas with a UK tax liability; and individuals who have moved overseas without paying the tax owed.

This document will be discussing civil powers only.

‘Offshore tax’ is a UK tax that is due as a result of non-UK income, gains, or transfers that involve a territory outside the UK.

1.1. On 23 March 2021 HMRC published a discussion document, Preventing and Collecting International Tax Debt. It is part of the implementation of the government’s ‘No Safe Havens 2019’ offshore tax compliance strategy which was published at Spring Statement 2019.

1.2. The ‘No Safe Havens’ strategy sets out how HMRC will help to ensure offshore tax compliance by focussing on three areas: leading internationally, assisting compliance and responding appropriately. The strategy emphasises that HMRC should consider the compliance process from beginning to end: from understanding tax obligations to paying the tax due.

1.3. The prevention and collection of tax debt is made more challenging when the debt is international rather than domestic: i.e., when the taxpayer or their assets or both are outside of the UK. HMRC estimated the amount of UK tax debt owed by taxpayers based abroad as around £1 billion in January 2020. This was, of course, prior to the global pandemic.

1.4. In order to explore this complex area, HMRC published the ‘Preventing and collecting international tax debt’ discussion document to engage with external stakeholders early in the development of policy, to gather evidence and test our initial thinking.

1.5. The international tax debt discussion covered all three areas of the No Safe Havens strategy as it considered how HMRC could lead internationally on preventing and collecting international tax debt, how we can assist compliance by helping taxpayers to be aware of their obligations to pay international tax debt, and how we can respond appropriately to the minority that choose not to pay their international tax debt.

1.6. The discussion document invited comments on:

• whether HMRC had correctly identified the causes of international tax debt
• what more HMRC could do to help taxpayers to avoid accruing international tax debt
• identifying barriers to collecting international tax debt

1.7. The ‘Preventing and collecting international tax debt’ document was published alongside the ‘Helping taxpayers get offshore tax right’ document and some external engagement for the papers was carried out together. However, HMRC are publishing a separate response for each discussion document.

1.8. The ‘Modernising tax debt collection from non-paying businesses’ Call for Evidence (CfE) was published on 30 November 2021 covering the collection of both international and domestic tax debt. The aim of this call for evidence is to ensure HMRC’s approach to both international and domestic tax debt is fit for a modern tax system and remains fair and effective for all taxpayers in light of the changing nature of business. The call for evidence sought views on HMRC’s approach to the small minority of taxpayers who do not engage with HMRC and hold off paying for as long as they can.

1.9. Although it could not have been foreseen when it was first planned the discussion document was published during a global pandemic. HMRC understands that the pandemic has had a significant effect on the level of debt and the capacity of some taxpayers to pay. The full details of this are not yet clear but HMRC will take this into account in its policy and operations in the future.

1.10. In addition to inviting written responses HMRC held five virtual workshops considering both discussion documents with a cross-section of interested external parties in May 2021. The aim of these workshops was to stimulate consideration and discussion in advance of the written replies. Separately, HMRC also met representatives from two large professional services firms: KPMG and Pricewaterhouse Coopers (PwC).

1.11. HMRC is grateful to stakeholders who have contributed to this discussion. We received 15 written responses. A breakdown of the respondents is as follows:

• 4 representative bodies
• 7 professional advisors
• 4 individuals

1.12. We also received many ideas and suggestions in meetings and workshops which HMRC held at the time. A breakdown of those who contributed is as follows:

• 4 representative bodies
• 25 professional advisors
• 25 individuals

1.13: Chapter 2 of this document sets out the questions posed in the discussion document, summarises what respondents told us and provides a government response. Chapter 3 then provides more detail on the next steps and how HMRC plans to take this work forward.

1.14: The Appendix contains a list of all respondents, excluding individuals, who provided a written response.

2. Responses: Preventing and collecting international tax debt

Overview of the discussion document

2.1. The document primarily sought views on the following areas:

• Understanding international tax debt: Have HMRC correctly identified the causes of international tax debt? How do taxpayers or their agents become aware of international tax debt?  

• The prevention of international tax debt: Are there common patterns to the creation of international tax debt and, if so, what more can HMRC do to help taxpayers avoid accruing debt? Does HMRC have the right data, are we making best use of it and could our guidance be improved? The question of using conditionality was also considered. The idea of tax conditionality is that good tax compliance should be one of the conditions that must be met in order to obtain certain licences or services.

• The collection of international tax debt: What are the barriers to collection of international tax debt? What difference does the international aspect make to communication with taxpayers and payment of the debt? We invited suggestions on developing international cooperation in this area. We also explained some potential sanctions to stimulate discussion.

Understanding international tax debt

2.2. The discussion document explored the difficulties of identifying, analysing and collecting international tax debt. The primary complication is that the taxpayers and/or their assets are in another jurisdiction. This causes difficulties in contacting taxpayers and, where an individual is globally mobile, it can be difficult to establish whether an international tax debt exists in the first place.

2.3. The discussion document acknowledged that international tax debt must be tackled by various means, but understanding the causes is the first step in improving prevention and collection. The government asked stakeholders for their lived experiences of the causes of international tax debt and welcomed views on difficulties they faced.

Question 2.1: If you have had experience with international tax debt, what circumstances led to the failure to pay UK tax and the creation of an international tax debt?

Question 2.2: How did the international tax debt come to light and how was it dealt with?

Stakeholder responses

2.4. There was general agreement about the causes of international tax debt that HMRC had outlined in the document. Respondents agreed that most taxpayers want to pay the right amount of tax but may not be aware of their tax obligations, so more should be done to build awareness and educate taxpayers on their obligations.

2.5. Some respondents highlighted difficulty in communicating with HMRC and paying the tax due. They suggested several reasons for this, including letters not being received in time, limited payment methods being available for taxpayers outside the UK, and agents being unable to contact HMRC quickly due to delays in getting government gateway authority.

2.6. The discussion document asked whether the P85 form (‘Leaving the UK – getting your tax right’) was of use in getting taxpayers to consider tax due as they left the UK. However, respondents highlighted the voluntary nature of the P85 form which means it is only used in limited circumstances. One respondent stated that the P85 form is primarily used by those seeking a tax refund before leaving the UK and suggested that the form’s scope should be extended to all those leaving the UK to ensure the correct amount of tax is paid or repaid.

2.7. Respondents noted that there is a minority of taxpayers who intentionally choose not to pay tax and that they should be dealt with separately to the majority who try to get it right.

2.8. When explaining how international tax debt came to light, most responses outlined 3 scenarios:

1. an unrepresented taxpayer will be contacted by HMRC and then seek professional advice on paying an international tax debt
2. a taxpayer will seek professional advice as they are unable to pay tax due or are unable to contact HMRC
3. a disclosure of additional tax due is made by a taxpayer after they are questioned about the non-declaration of income by their advisor or HMRC

Government response

2.9. The government notes that respondents generally agreed with HMRC on the causes of international tax debt. It also agrees that the minority that intentionally choose not to pay tax should be dealt with separately to the majority of taxpayers who try to get it right. Responding appropriately and proportionately to non-compliance is one of the key areas set out in the No Safe Havens 2019 strategy. This insight and approach will underpin the work underway to help to prevent and collect international tax debt.

2.10. The government recognises that there are potential challenges for overseas taxpayers who are trying to contact HMRC. The comments on the difficulties of communicating with HMRC, and alternative methods of payment for those outside the UK are dealt with below, in sections dealing with those specific topics.

2.11. HMRC is exploring ways in which we can improve and develop the use of the P85 form. One example is that the government has committed to working with the Student Loans Company to share HMRC’s P85 data with them to help them to remain in contact with students who move overseas, as students do not always inform the Student Loans Company when doing so. This data sharing is now routine practice.

Preventing international tax debt

2.12. International tax debt is more difficult for HMRC to collect than domestic tax debt and it becomes harder to recover the older it gets. If we can prevent international tax debt before it arises, then this will reduce the amount of international tax debt we must collect.

2.13. Having considered the difficulties of collecting international tax debt, the discussion document explored ways in which we can develop the collection and use of data, improve guidance, and make paying tax easier to prevent the creation of international tax debt.

Developing the collection and use of data

2.14. HMRC asked for views on how we could use data and work with professional bodies to raise awareness of UK tax obligations. Research could help to establish patterns of risk and find out which trades, professions and activities are more at risk of creating international tax debt.

2.15. The government has published a 10-year tax administration strategy, ‘Building a trusted, modern, tax administration system’, including an ambition to move further towards a fully digital tax system. This will allow HMRC to better analyse the data it has and could provide opportunities to establish patterns of risk more easily.

Question 3.1: Are you aware from experience of other causes of international tax debt? What could be done to prevent the debt accruing in these cases?

Question 3.2: From your experience, are there any professions or activities which are more likely to lead to the creation of tax debt?

Question 3.3: From your experience, are there particular jurisdictions which are more likely to be linked to UK international tax debt?

Question 3.4: What more could HMRC do with the data we have to prevent international tax debt?

Question 3.5: Would collecting more information in high-risk situations or where taxpayers’ international, financial affairs are complicated (paragraphs 3.8 to 3.12) be reasonable and proportionate to prevent international tax debt? Please explain your answer.

Stakeholder response

2.16. A number of suggestions were made by respondents to prevent international tax debt from accruing. These included recommendations to improve HMRC’s systems to enable better access to online portals, increased external collaboration with professional bodies to raise taxpayer awareness and making better use of existing powers such as Schedule 13 of Finance Act 2020 (for example, joint and several liability of company directors for a company’s debts in certain circumstances).

2.17. Respondents agreed that highly global professions and activities were most likely to lead to the creation of international tax debt. Examples of such professions and activities were given and included emigrating/ immigrating individuals, e-commerce businesses, non-resident landlords, non-resident corporates and foreign trusts. Some suggested that individuals who can earn revenue through the exploitation of image or brand rights, such as footballers and high-profile personalities, were more likely to be at risk of creating international tax debt.

2.18. There was no general consensus in the responses on any particular jurisdictions that were more likely to be linked to international tax debt. It was suggested HMRC should increase investigatory resource into jurisdictions with no or nominal tax as they continue to be used and may change their status over time.

2.19. For question 3.4 many respondents agreed with HMRC that data should be used to identify high-risk groups and more targeted engagement should be carried out for these groups. Most supported risk-based correspondence (nudges) as an effective tool in preventing international tax debt as this is less confrontational and encourages taxpayer compliance. Respondents recommended that all nudges should include guidance and support to make the process as easy as possible for the taxpayer.

2.20. Most respondents agreed that collecting more information in high-risk situations or where taxpayers’ international, financial affairs are complicated was reasonable and combining data sources would be helpful. However, responses highlighted the need for HMRC to ensure this data collection was carried out without imposing any further burdens on the compliant population.

2.21. Some responses suggested that HMRC should consider how to share information reasonably and proportionately with taxpayers to increase taxpayer awareness of the debt collection process, encourage compliance and act as a deterrent.

Government response

2.22. The government is considering the suggestions made by stakeholders to help prevent the creation of international tax debt. Work is underway looking at a single solution to allow online access for all government digital services. This will transform taxpayer interactions with HMRC by making taxpayer interactions simpler and easier.

2.23. HMRC published [new guidance] (BROKEN LINK) on the application of Schedule 13 of Finance Act 2020 in October 2021. The government is reviewing the use of this power for international tax debt cases.

2.24. The government acknowledges suggestions about the importance of prevention in the creation of international tax debt in the first place and the key role data plays in this.

2.25. The government is currently considering ways of sharing with taxpayers the data received through the automatic exchange of information, primarily to help taxpayers register for self-assessment at the right time, and therefore help to prevent the accrual of international debt. A pilot project in sharing data is being considered to evaluate this approach. This is discussed further in the ‘Helping taxpayers get offshore tax right’ response document.

Guidance

2.26. Government-issued guidance is the first source of help for many taxpayers, so HMRC is exploring new ways to make it available to those most at risk of incurring international tax debt.

2.27. The discussion document asked for views on the best formats, platforms and ways of promoting guidance directed at those with offshore income and assets.

Question 3.6: How can HMRC improve educational material and guidance to prevent the creation of international tax debt?

Question 3.7: How might HMRC better work with agents and intermediaries to ensure guidance has the most impact?

2.28. The majority of respondents’ overarching conclusion was that offshore guidance needed to be reviewed and improved to make it more accessible.

2.29. There were several suggestions as to ways in which guidance could be adapted including: guidance being made available via telephone for those with limited internet capabilities; guidance being available in different languages; and targeted social media campaigns. Whilst all guidance can be found on GOV.UK, one respondent suggested having a specific landing page for those with offshore income to help navigation.

2.30. Other respondents highlighted that HMRC should be raising awareness of guidance via measures such as using overseas networks, targeted social media campaigns, providing information in embassies and the creation of a dedicated offshore helpline.

2.31. There was also general agreement that HMRC should work with professional bodies to raise awareness of UK tax obligations among those who are more likely to accrue international tax debt and provide advice to those who are already in debt.

2.32. It was suggested that help sheets regarding debt could be shared with agents, which they could then pass on to clients. Another suggestion highlighted the benefits of working in a more collaborative way with external stakeholders, such as sharing draft guidance for feedback.

Government response

2.33. Guidance is currently available over the telephone for taxpayers with limited data capabilities. In addition to this, customers based outside of the UK can contact HMRC even if they are calling from an international telephone number.

2.34. HMRC has set up the Offshore Forum to help stakeholders to put forward their views to HMRC. The Forum will bring many benefits, including a continuation of the positive engagement which followed the publication of the two discussion documents. This Forum will enable HMRC to discuss with external stakeholders, at an early stage, policy and operational issues including guidance affecting HMRC’s approach to the taxation of non-UK income, gains and assets. This Forum will facilitate increased collaboration with stakeholders and the opportunity to comment on guidance.

2.35. HMRC has also developed communication campaigns relating to foreign income and, particularly, foreign rental income. This includes social media campaigns on Facebook, LinkedIn and Twitter as well as a YouTube tutorial and a Webinar, to assist customers with their foreign income obligations, particularly those who aren’t represented. These campaigns will continue throughout the year and HMRC will consider how to target taxpayers that are at higher risk of accruing international tax debt.

Making paying tax easier

2.36. The discussion document asked for comments on ideas to make paying tax easier. Ideas included increasing the payment options for taxpayers outside the UK, increasing withholding tax for certain non-UK resident entertainers and sportspeople and tax conditionality.

Question 3.8: What factors should be taken into account in deciding the rate of tax withheld from payments to non-UK resident entertainers and sports professionals?

Question 3.9: What are your views on making the application for a reduced rate of withholding for non-UK resident entertainers and sports professionals, conditional on tax compliance?

Question 3.10: What are your views on using tax conditionality to limit the creation of international tax debt?

Question 3.11: In what other ways do you think tax conditionality could be applied to limit the creation of international tax debt?

2.37. A majority of respondents suggested that if the application of a reduced rate of withholding for non-UK resident entertainers and sportspersons was to be made conditional on tax compliance HMRC would need to have sufficient resource to do this effectively, including maintaining up-to-date records on all foreign entertainers and sportspersons who were travelling in and out of the country. Any potential policy change would have to be proportionate and justified and a further consultation would be required to fully explore any current issues and potential solutions.

2.38. Three respondents suggested that a more nuanced approach of better collaboration between the Foreign Entertainers Unit who have operational oversight of the legislation in HMRC, and tax agents may be more effective as early engagement may result in tax being paid earlier or on time.

2.39. For question 3.10 many respondents suggested that conditionality should only be used if it is easy for overseas taxpayers to comply with UK tax obligations and there were challenges with the current systems which may make it difficult to pay international tax debt. Conditionality measures may be a suitable approach for high-risk groups or those with a poor payment history, but even then appropriate safeguards would need to exist.

2.40. Some respondents suggested that there may be a case for conditionality in certain circumstances, but HMRC should be aware that certain conditionality measures may have an effect on the commercial attractiveness of the UK as a place of business.

2.41. Other respondents encouraged the alternative approach of HMRC making better use of existing powers to limit the creation of international tax debt. Some examples of this include using data to flag international tax debts at the border through exit/entry interviews, explaining obligations to those entering/leaving UK, or simply using the border interaction to make the taxpayer aware that their debt is outstanding and will be communicated to their new country of residence.

Government response

2.42. The government wholly agrees that any potential change to the existing non-resident foreign sportspersons and entertainers legislation would have to be proportionate and justified and, where appropriate, would be subject to further consultation, as necessary.

2.43. We are currently working to better understand this customer population by carrying out research to establish how much of the tax relating to foreign entertainers and sportspersons goes on to become international tax debt. Once we better understand the challenges this population faces in paying their international tax debt, we can consider whether a change in legislation is required.

2.44. The government will consider how conditionality can be used and agrees that any conditionality measures would require careful consideration of any economic consequences, and that appropriate safeguards would be required. HMRC’s payment systems are constantly reviewed and where appropriate updated, but the government will continue to look at how they can be improved as part of our commitment to ‘Building a trusted, modern tax administration system’.

Improving the collection of international tax debt

2.45. The government asked for views on how to improve the collection of international tax debt. Specifically, the discussion document considered how HMRC could improve payment processes and communications with international debtors and how we could collect international tax debt if the taxpayer refuses to cooperate.

Question 4.1: How could the collection of international tax debt be improved?

2.46. Many respondents highlighted the importance of communication. There were several suggestions as to how communication could be improved including the inclusion of payment information earlier in the compliance lifecycle and more efficient HMRC systems to reduce the time gap between income realisation and payment for high-risk groups.

2.47. Some respondents believed that overseas taxpayers do not have enough time to challenge decisions and suggested that HMRC should extend the time to submit appeals (to 90 days instead of 30) or create an online portal for appeals.

2.48. The idea of using certificates of good standing was also suggested by some respondents. It was reported that these are used in some other countries. A certificate of good standing would have to be obtained by taxpayers before they departed the UK, to show that they have met their tax obligations and have no outstanding liabilities.

Government response

2.49. We have responded to comments more specifically on communication in a dedicated section below.

2.50. Under the existing process for challenging decisions HMRC already have the facility to accept late appeals where appropriate, so creating a separate, extended appeals process for overseas taxpayers is not necessary. The 30-day limit is sufficient in the majority of cases and HMRC or the tribunal can accept late appeals in exceptional cases.

2.51. The certificate of good standing is a measure that is used by some other jurisdictions. However, introducing this in the UK would require legislation and also the co-ordination of complex data and cross-departmental operational collaboration. The idea therefore needs much further consideration before a decision could be made on whether to take it forward.

Communication

The discussion document asked for suggestions on how to improve communications with taxpayers located outside of the UK, including greater digital communications and contact with agents and intermediaries.

Question 4.2: How might HMRC improve our communications to collect international tax debt more effectively?

2.52. There was general support for the measures proposed in the discussion document including the use of digital communications, and increased payment methods, and agreement that better communication between HMRC and customers would improve the collection of international tax debt.

2.53. The majority of respondents favoured using email as the preferred method of communication with taxpayers outside the UK. Post was slower and more likely to encounter delays. Some respondents acknowledged the challenges of verifying identity over emails but explained the problems of using the post – resulting in delays in contacting customers. There was a suggestion of including email authority within the form 64-8 (used by a taxpayer to authorise HMRC to deal with their agent) earlier in the process to avoid delays later.

2.54. Some responses suggested that HMRC should use existing customer data to copy all debt collection letters to agents to increase the likelihood of information reaching taxpayers. Two respondents emphasised that communications in general should be improved and where possible HMRC should be making use of various methods to contact taxpayers such as email, phone number, and private chat services.

2.55. Another suggestion was for HMRC to use Post Office (PO) box addresses where the customer requested this. One further idea proposed was for HMRC to put a notification of a tax debt in the taxpayer’s online tax account. It was also suggested that HMRC should use another language in communicating with a customer (alongside English) if this would be easier for the customer.

Government response

2.56. The government acknowledges the need to improve communication between HMRC and taxpayers and is considering a number of ways and various channels through which information can be sent and received in addition to those already used.

2.57. We acknowledge suggestions from stakeholders to communicate in different languages. HMRC carried out a successful pilot where we used bi-lingual letters to contact customers based in France and Spain. This had to be paused due to the pandemic but is under way again. We understand that those who have outstanding tax liabilities includes those based in other countries and we are seeking ways to tailor our approach and methods of communication to take account of this.

2.58. We will continue to work towards initiatives such as issuing targeted communications to those whom we consider to be at risk of developing international tax debt. This is part of HMRC’s work to help taxpayers get their tax right. HMRC has a targeted communications campaign aimed at the high-risk population.

2.59. The use of PO boxes and BX post codes has been considered by the government. The government understands the advantages of PO Boxes and BX post codes and knows that the non-geographic BX postcode can be useful for large organisations as they offer long-term flexibility. However, HMRC has a responsibility for maintaining confidentiality for its customers and the security concerns caused by using these types of addresses mean that HMRC cannot use them under present circumstances.

2.60. Improving digital communication is an important area for HMRC. Notifications on online tax accounts (perhaps including copies of letters, as suggested) and easier access to digital services (through ID checks) are being explored. HMRC’s ambition is to provide access to our digital service for all taxpayers. This will support the government’s aim of providing all citizens with access digital services.

Payment processes

2.61. HMRC are exploring possible improvements to payment processes for taxpayers based overseas, particularly those based outside the UK and the European Economic Area (EEA).

Question 4.3: What specific challenges are you aware of for taxpayers who try to pay debts from outside the UK?

Question 4.4: How could payment processes for outstanding debt be improved when the taxpayer is outside of the UK?

2.62. Some respondents explained the challenges they had faced whilst trying to pay, including difficulties in setting up time to pay arrangements, call centres being inaccessible due to the cost of calling from abroad and issues caused by time differences.

2.67. It was suggested that it may be beneficial to allow time to pay arrangements to be made online for more than just income tax self-assessment.

2.68. The majority of respondents suggested it would be useful to inform customers of their payment options earlier on in the process. Another solution proposed was to increase the number of payment options, particularly the use of more modern methods of payment such as PayPal. Furthermore, respondents felt that enabling payment by direct debit from international bank accounts and by non-business international credit cards could help make the process of paying tax easier.

2.69. Some respondents proposed allowing taxpayers to make in-year payments before they depart the UK which would ensure tax was paid earlier and align with the Tax Administration Framework Review work on Timely Payments (Timely Payment: Call for Evidence, published 23 March 2021).

Government response

2.70. There are a number of factors which make payment from outside the UK more difficult and which limit the ways in which payment can be made. HMRC is undertaking a project to try and understand the problems customers face when paying their international tax debt. We will look to continue this conversation via the Offshore Forum.

2.71. As a part of the government’s 10-year tax administration strategy ‘Building a trusted, modern tax administration system’ we are exploring the challenges and benefits of calculating and paying tax closer to the point where the profit or income arises. HMRC published a CfE and summary of responses on Timely Payment (Timely payment: summary of responses, published 30 November 2021) HMRC are also currently conducting an In-Year Calculation Proof of Concept (IYC PoC) pilot to test the viability of accurate or near accurate in-year tax calculations using real-time or close to real-time data. The IYC PoC is being developed in close collaboration with the Timely Payment External Working Group, ensuring external insight and experience are fully utilised in the co-design of an optimum IYC PoC.

2.72. The in-year calculation and payment of tax for taxpayers who are leaving the country will be considered in the development of this policy as a whole. In the Timely Payment CfE the government committed to making no changes to payment timings during this Parliament. It also reiterated that this is a long-term ambition which will be developed in close collaboration with external stakeholders through the Timely Payment External Working Group.

Non cooperation

2.73. The vast majority of taxpayers pay tax on time. However, there are a small minority who refuse to engage, despite repeated attempts to contact them by HMRC, and who have the means to pay the tax they owe but they have chosen not to.

2.74. The discussion document asked stakeholders for ideas on how we should address taxpayers who do not engage with HMRC or decide not to pay their debt.

Question 4.5: What ideas do you have to improve international cooperation and to increase the rates of collection within other jurisdictions?

2.75. Respondents generally agreed that more work could be done to improve international co-operation but wanted more information as to how or why the current arrangements were ineffective.


2.76. A third of the respondents suggested that we should publicise mutual assistance in collection agreements, so they act as a deterrent to those leaving the UK with unpaid tax debts. Some respondents suggested expanding the scope of existing agreements to include more countries alongside this.


2.77. Respondents also suggested using forums such as the Organisation for Economic Co-operation and Development (OECD) to publicise and raise awareness of the work being carried out on an international level.

Government response

2.78. Assistance in Collection (AIC) agreements which allow tax authorities in other countries to collect debts on HMRC’s behalf are in place with a large number of jurisdictions around the world. An AIC article can be requested by the UK as part of double taxation agreements and almost always is requested with new agreements and with revisions to existing ones (although that is subject to negotiation and agreement with the other party). The various arrangements in place through multi-national bodies mean that coverage is extensive. The government is considering ways to make these AIC arrangements more widely known to act as a deterrent for those taxpayers who leave the country while owing tax to HMRC through focused communications and including, possibly, through HMRC officers located abroad.


2.79. The government agrees that more work can be done to improve international cooperation. As mentioned in the discussion document, although we often have AIC provisions in tax treaties, there are nevertheless challenges to making these operate with full effectiveness, for example in cases where making an application for assistance in collection can incur higher administrative costs than the tax owed.

2.80. HMRC currently has several internal and external networks that we use to collaborate with other countries. For example, HMRC is an active member of the OECD Tax Debt Management Network, which provides an opportunity to share best practice, learn and discuss debt collection methods and policy. It is also an active member of the Intra-European Organisation of Tax Administration (IOTA) which is made up of 44 Tax Administrations. Internally, HMRC is committed to using its existing network of Fiscal Crime Liaison Officers (FCLO network) in other countries to help raise awareness of tax obligations and help debt collection.

2.81. The government will consider ways in which to publicise mutual assistance in collection agreements and raise awareness of our international work.

Inhibiting access to UK markets to deliberate overseas tax evaders

2.82. The discussion document asked whether HMRC should reduce access to UK markets for overseas businesses that are deliberately evading UK tax and where efforts to collect the tax have proved unsuccessful. The government asked for views on what would be a proportionate response.

Question 4.6: What opportunities and challenges should be explored around inhibiting access to UK markets for deliberate overseas tax evaders?

Question 4.7: Are there any sanctions which might be particularly suitable for application with regard to international tax debt arising from the VAT regime?

Question 4.8: What alternative approaches or ideas do you have to pursue the minority who deliberately do not pay their international tax debts?

2.83. Respondents suggested that any measures should only apply to those that are deliberately avoiding payment, rather than those who are ignorant of their obligations and may have made a mistake, or those that have rectified previous non-compliance.

2.84. One respondent said HMRC would need to define clearly the threshold of non-compliance or deliberate overseas tax evasion which would trigger the application of any sanction. We would need to ensure appropriate safeguards and appeal routes are available, as someone who is subject to a conditionality measure may suffer subsequently from loss of income etc. All respondents to this question recommended further exploration on this idea and the need for a full consultation.

2.85. The Institute of Chartered Accountants in England and Wales and the Chartered Institute of Taxation suggested using the new joint and several liability powers to collect corporate debts from directors or other persons under Schedule 13 of the Finance Act 2020. Another respondent suggested HMRC should work more closely with other government departments, such as the Home Office, to ensure debts are paid before citizenship is granted. There was a suggestion to use private debt collection agencies, but further consultation would be required.

Government response

2.86. HMRC agrees that measures designed for those deliberately refusing to pay should not inadvertently penalise those who are unaware of their obligations, or have made a mistake, and the discussion document sought to distinguish this group from those who deliberately evade paying tax. HMRC agrees that if any new legislative measure is considered which would reduce access to UK markets for overseas businesses that are deliberately evading UK tax, then it will be important to carefully and clearly define the extent and application of that measure. HMRC would also consider what guidance should be provided and what safeguards for taxpayers would be appropriate. The government agrees that any new measures like this would be appropriate for a full public consultation.

2.87. As mentioned previously new guidance on the application of [Schedule 13 FA2020] (BROKEN LINK) was published in October 2021. HMRC is considering the use of Schedule 13 FA2020 powers in international tax debt cases.

3. Next steps

Actions taken already

3.1. HMRC has set up the Offshore Forum which will allow the valuable dialogue with agents and other intermediaries, started as part of this discussion, to continue. The Forum allows HMRC to discuss developing policy ideas, and other ways of promoting tax compliance, with stakeholders. The first meeting of the forum took place in November 2021 and was well attended. If you would like further information on the Forum please email [email protected].

3.2. Work is already taking place to increase the number of taxes for which a Time to Pay (TTP) arrangement can be set up online (sometimes known as Self Serve TTP). At the moment this is only available for taxpayers on Self Assessment. We expect to extend this to PAYE in the summer of 2022 and then to VAT in the autumn or winter of 2022. A further extension to other taxes may follow. These arrangements will be available to taxpayers outside the UK. However, in order to set up a TTP arrangement a taxpayer must have a UK bank account from which a direct debit can be set up and HMRC acknowledges that this will be an obstacle for many taxpayers based outside the UK.

3.3. HMRC will continue to play a leading role in international tax work at the OECD, for example in the Forum on Tax Administration (FTA) and the Tax Debt Management Network.

Future Action

3.4. Preventing and Collecting International Tax Debt was published in tandem with Helping Taxpayers get Offshore Tax Right, another discussion document. The engagement with customers and advisers which followed publication was combined and the two summaries of responses are being published at the same time. The process of developing and assessing the ideas received in the responses is already well under way but will continue for some time.

3.5. When considering ideas two factors that will be considered are whether they support HMRC’s offshore compliance strategy, No Safe Havens, and the direction of development set out in HMRC’s 10-year strategy Building a trusted, modern tax administration system. Where appropriate ideas will be subject to formal consultation.

3.6. It is important to note that this paper summarises the responses and is not a verbatim record of all responses due to the number and amount of detail provided. This paper does however, present the main ideas and arguments made in the responses.

Annex: List of respondents who provided written responses to ‘Preventing and collecting international tax debt’

• AMP Tax Dispute Resolution
• BDO
• Blick Rothenberg
• BNY Mellon
• BSA
• Chartered Institute of Taxation
• CSM Tax Co
• Deloitte
• ECCU
• Ernst & Young
• Expat Tax
• Field Court Tax Chambers
• Field Tax
• Group Tax
• Hansuke Consulting
• Harbottle
• Institute of Chartered Accountants of Scotland
• Institute of Chartered Accountants of England and Wales
• Information Commissioners Office
• Low Income Tax Reform Group
• Kleinwort Hambros
• KPMG
• Law Society (The)
• McKenna Tax Consultancy
• MD Advisory
• NatWest
• OTS
• PKF Littlejohn
• PricewaterhouseCoopers LLP
• Ruffer LLP
• STEP
• SVB
• UK Finance
• UK USA Tax
• Utmost Wealth Solutions
• Zast Accountancy