The new research from international law firm Pinsent Masons reveals 43% decrease in the number of UK businesses being monitored by HM Revenue and Customs (HMRC) for lacking substantial presence in territories considered ‘tax havens’.
The count fell from 512 to 294 over the past year (2024).
HMRC has been actively pursuing UK businesses operating in regions such as the British Virgin Islands and the Bahamas, which are among the 11 jurisdictions under scrutiny for being potential tax havens.
The others include Anguilla, Bahrain, Barbados, Bermuda, Cayman Islands, Guernsey, Isle of Man, Jersey, and Turks and Caicos Islands.
These territories are part of an Organisation for Economic Co-operation and Development (OECD) programme that mandates local tax authorities to report British companies failing to maintain adequate ‘substantial activity’ within their borders.
The OECD, consisting of 38 developed member countries, focuses on international trade and tax policy collaboration.
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By GlobalDataThe initiative by HMRC to investigate UK businesses is aligned with the OECD’s ‘No or Only Nominal Tax Jurisdiction’ project.
This project aims to eliminate the exploitation of tax havens by enhancing global tax authority data sharing, setting minimum business standards for proving local operations, and establishing baseline corporate tax rates in these jurisdictions.
Pinsent Masons partner Jake Landman said: “If British businesses want to claim that they should be paying taxes in places like the Bahamas, rather than the UK, they now need to prove that they are present there in a significant way. That includes factors like having senior management and operating expenditure there.”
“Another key part of the OECD’s clampdown on ‘tax havens’ is pushing those countries to improve their own data and systems. That is helping them to identify businesses that are trying to use their jurisdictions without meeting the ‘substantial activity’ requirements. That HMRC now receiving fewer reports from ‘tax havens’ is likely down to two factors: more companies are now meeting the ‘substantial activity’ requirements, and fewer large corporates are operating in those territories because it has ceased to be worth their while considering the attention it now attracts from HMRC.”
This downturn in HMRC’s tracking activities follows a trend in November 2024, where investigations into serious tax fraud and avoidance hit a six-year low.
The number of HMRC tax fraud investigations also saw a decline from 1,091 in the fiscal year 2022–23 to 480 in 2023–24.
