UK Government’s Tax Take From Foreign Fund Managers Up 27 Per Cent

Stephen Little

7 October 2014

The HM Revenue and Customs team targeting foreign investment bankers and fund managers living in the UK has seen its take from investigations and other compliance work for 2013-14 jump by 27 per cent to £153.6 million ($247.1 million), up from £120.8 million in 2012-13, according to law firm .

Ray McCann, partner at Pinsent Masons, said that City high flyers have always been a prime target for HMRC because they tend to bring in significant compliance yield for the Revenue, which knows it is an area where businesses and individuals often make mistakes.

“The rules are complicated and businesses need to understand both the law and HMRC practice to avoid making costly mistakes,” said McCann.

“With the increased pressure to try and boost its revenue it comes as no surprise that HMRC is continuing to target wealthy expats and the better off generally, many of whom work in investment banking and hedge funds with generous pay and bonuses,” he added.

Pinsent Masons said HMRC is likely to continue to set challenging targets to increase revenues from compliance work, targeting staff working in investment banking, private equity and hedge funds.

McCann pointed out that the increase in the amount of money taken through tax investigations has risen even though City bonuses seem to have fallen.

“The fact that HMRC’s increase in yield is against the tide of overall falls in remuneration for investment bankers shows how successful they are being in this area,” said McCann.

“It’s easy for expats to make mistakes on their tax returns because they haven’t fully understood the tax rules in the UK. They may also have income from investments in other countries, or even overseas tax liabilities that all need to be properly documented and accounted for to HMRC. This makes their tax affairs fairly complex," said McCann.