Expat contractors who are earning big salaries without paying tax in their home countries are running out of time to put straighten their finances, say recruitment experts.
Contractors who are still tax resident in the UK but fail to declare their offshore earnings are one target for global tax authorities.
Many contractors still subject to UK tax are trying to stay under the radar and believe because they work live and work overseas that tax rules in Britain do not apply to them.
International contractor managers CXC Global argues that a new international tax network due to come online in 2017 will allow governments to automatically swap financial information about contractors from other countries with their home tax authority.
Global tax network
Almost 100 countries have signed up to the network, nicknamed GATCA – the Global Account Tax Compliance Act after the US Foreign Account Tax Compliance Act (FATCA) which was implemented in July.
GATCA is expected to reveal details of bank accounts, references, identify where contractors are tax resident and in some cases, where they work.
For taxpayers, the network means no additional financial reporting other than providing identification documents to banks and other financial institutions.
The financial institutions then report information about bank balances and earnings from investments and this data is cross-checked by tax authorities against taxpayer filings to make sure income has been correctly declared and the right amount of tax paid.
Jon Clarke, commercial compliance manager at CXC Global, said: “Tax agencies have been cracking down on contractor non-compliance for several years, but the new tax network is a game changer.
“Anyone who is not paying the right amount of tax or breaking the rules faces discovery, fines or even prosecution for tax evasion.”
Contractors should not ignore the warning signs, he explained.
“Reduced penalties and amnesties are a last-chance saloon to sort out financial affairs,” he said. “Once the opportunity closes, the reality is government will know who is not paying the right amount of tax and will chase them down.
“If this happens, contractors have the prospect of investigations going back for a decade. They will also face much harsher punishment after turning down the chance of getting straight.”
Clarke also suggests that complicated contractor tax schemes, such as IR35 in the UK, will be superseded in this new era of co-operation.