HMRC gain yet more visibility to Digital & Offshore Assets

Lynn Gracie, Private Client International Tax Director, author of blog about tax domicile

It is well documented that global tax jurisdictions are struggling to keep tabs on the digital economy. It is therefore unsurprising that countries are keen to work together to help them pin down individuals and businesses who are not reporting their profits correctly.

We can confirm there have been a number of recent International information exchange agreements, signed in the spirit of global tax collaboration.

They follow many existing agreements, the most significant being the Common Reporting Standard, (CRS) which was initiated in 2014 and now includes over 100 countries, all agreeing to exchange financial account information.

The new agreements focus on digital platforms, but interestingly, also help to deal with those who are trying to circumvent the CRS requirements.

Reporting by Digital Platforms

For so long, profits realised from these platforms have been viewed as difficult to identify from a tax reporting perspective, given the sometimes opaque nature ownership and trading location. In November 2022, 22 countries signed an agreement to automatically exchange information collected by operators of digital platforms. It will allow HMRC to see transactions and income generated by platform sellers in the sharing and gig economy.

Common Reporting Standard (CRS) – Mandatory Disclosure & Anti Avoidance Rules

At the same time as the above was signed, 15 jurisdictions have reached an anti- avoidance agreement to exchange information via intermediaries who identify arrangements to bypass the automatic exchange of information agreements upheld by the CRS. This will allow tax authorities, including HMRC, to ensure compliance of both the taxpayers and intermediaries involved in disguising the beneficial ownership of offshore assets.

Crypto-Asset Reporting Framework

The CRS mandatory disclosure rules are part of a broader framework of global transparency. In August this year, the OECD approved the Crypto Asset Reporting Framework (CARF) which provides reporting of tax information connected to Crypto in a standardised format, with a view to automatically exchanging such information. Certain electronic money products and Central Bank Digital Currencies are now in the CRS scope.

There really is no hiding place for income and assets that are held either digitally or offshore. Nor will HMRC be kind to those who deliberately choose not to report such sources. There are still many who genuinely believe there is no requirement to report such income or gains, but our advice is always to seek professional advice to ensure details are correctly reported in jurisdictions involved.

We are perfectly placed to help with both UK and International tax aspects connected to digital or offshore sources. Please get in touch with your usual AAB contact, or alternatively, please contact Lynn Gracie

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Corporate Tax covers a broad and complex area of tax legislation, so we provide a suitably broad and comprehensively experienced team to support your business with pragmatic, commercial advice. Businesses of all sizes and types, and across a wide range of sectors, benefit from our comprehensive corporate tax compliance and advisory service. We have exceptionally knowledgeable tax teams distributed across our offices, ready to support you with their wealth of experience and expertise. We can manage your global tax exposure with a coordinated response that saves you having to seek advice from separate advisors.

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If you’re facing multi-jurisdictional challenges around global mobility, tax, employer responsibilities, accounting or other issues, we’ll save you the hassle of searching for international advice – the right people are already available in our expert teams and across our Reach Network. AAB works with multinational clients across the globe, so it’s only logical that we have a comprehensive and highly effective support network that work alongside our International teams to serve them, wherever in the world they operate.

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