Introduction

HMRC is conducting a war on two fronts.

Recent analysis reveals the Revenue has simultaneously escalated its pursuit of overseas multinationals suspected of underpaying UK tax whilst launching an unprecedented campaign targeting domestic cryptocurrency investors.

The combined strategy exposes HMRC’s dual priorities: extracting maximum yield from complex corporate structures while deploying technology-driven enforcement against retail taxpayers. Both require careful attention from practitioners.

The £16 Billion Corporate Target

According to data analysed by UHY Hacker Young, HMRC estimates that overseas companies underpaid £16.1 billion in tax last year, a notable increase from the £14.9 billion estimated in the prior period.

The jurisdictional breakdown reveals where HMRC perceives the greatest risk:

• United States: £8.7 billion (54% of total estimated gap)
• Switzerland: £3.0 billion (18.6%)
• Germany: £1.5 billion (9.3%)
• Other jurisdictions: £2.9 billion (18.1%)

These “tax under consideration” figures typically reduce following formal representations and negotiations. However, they serve as a direct map of HMRC’s enforcement priorities and indicate where investigation resources will be deployed.

Why Multinationals Are in the Frame

Several factors are driving HMRC’s intensified focus on overseas corporate taxpayers.

First, revenue targets. HMRC has been handed aggressive collection targets by the Treasury. High-value multinational operations offer the largest potential return on enforcement resources – a single successful transfer pricing case can yield more than thousands of smaller investigations combined.

Second, the politics of foreign ownership. A growing proportion of UK economic assets sits under overseas ownership. The Treasury is under political pressure to demonstrate that foreign-owned entities pay tax rates comparable to domestic businesses. Perceived unfairness undermines public confidence in the tax system.

Third, targeted mechanisms are delivering results. The Diverted Profits Tax (DPT) and Digital Services Tax (DST) together generated £1.5 billion in additional tax over the past year. Having proven these tools can extract revenue from previously hard-to-tax structures, HMRC is deploying them more aggressively.

As Philip Kinzett-Evans of UHY Hacker Young observed: “As we increase the taxes on UK residents, the expectation will be that overseas companies who operate in the UK should also pay their way.”

81,000 Crypto Nudge Letters

While corporate investigators pursue billions from multinationals, HMRC has simultaneously intensified enforcement against individual cryptocurrency investors. Over the past 12 months, the authority issued 81,000 “nudge” letters to crypto holders suspected of underpaying tax – a 25% increase year-on-year.

The growth trajectory is striking:

• 2023/24: 27,714 letters
• 2024/25: 65,000 letters
• 2025/26: 81,000 letters

This represents a near-tripling in three years. The current campaign relies on targeted requests to UK-based exchanges and voluntary disclosures. But the enforcement landscape is about to transform.

The CARF Timeline

From 31 May 2027, under the OECD’s Crypto-Asset Reporting Framework, HMRC will begin receiving automatic data feeds from exchanges in 52 jurisdictions. The initial wave includes the Channel Islands, Cayman Islands, Liechtenstein, and Ireland – financial centres where crypto businesses have clustered specifically to serve non-resident clients.

By 2028, an additional 15 jurisdictions will join, including Switzerland, Singapore, and Gibraltar. The transmitted data will include complete transaction histories, legal names, residential addresses, and National Insurance numbers.

Common Client Misconceptions

Practitioners should anticipate several persistent misunderstandings among retail and professional crypto investors.

Crypto-to-crypto trades are disposals. Swapping one token for another is a taxable event for CGT purposes, regardless of whether fiat currency was withdrawn. Many clients mistakenly believe they can defer taxation until they “cash out” to pounds.

Offshore platforms do not provide immunity. Using foreign exchanges without a UK bank account connection does not exempt UK tax residents from their worldwide reporting obligations. The forthcoming CARF data flows will expose this misconception at scale.

Staking and yield are income, not gains. Revenue earned through lending or staking digital assets is generally subject to Income Tax rather than CGT. This creates a two-stage tax liability that many investors have failed to recognise.

The Penalty Differential

Clients with unrecorded gains should understand the penalty structure before deciding their approach. The difference between voluntary and compelled disclosure is substantial:

• Unprompted disclosure (client approaches HMRC before any enquiry): penalties capped at 30% of unpaid tax, significantly lower investigation risk
• Prompted disclosure (client responds after receiving nudge letter or enquiry notice): penalties of 70% to 100% of unpaid tax, high risk of comprehensive audit

HMRC’s dedicated crypto disclosure facility offers a structured route for clients to correct historical non-compliance.

Timing is critical… the penalty escalation makes early action substantially cheaper than waiting.

Implications for Corporate Clients

The multinational enforcement data demands attention from practitioners advising cross-border structures. Transfer pricing policies should be audited for compliance with arm’s length principles. Permanent establishment risks require careful analysis, particularly for foreign-parented groups with significant UK operations.

The jurisdictional concentration, with US-parented companies accounting for over half of HMRC’s estimated gap, suggests American multinationals should be particularly alert to forthcoming scrutiny.

Practical Steps

For corporate clients: review cross-border transfer pricing policies, document the commercial rationale for intercompany arrangements, and assess permanent establishment exposure in light of HMRC’s enhanced focus.

For individual crypto clients: reconcile transaction reports from all exchanges (including offshore platforms) before the 2027 CARF implementation date. Where underreported gains exist, use HMRC’s disclosure service before receiving formal correspondence to access the lower penalty tier.

HMRC’s two-front offensive reflects the Revenue’s broader strategy: maximise yield from complex corporate structures while leveraging technology to democratise enforcement against retail taxpayers. Neither front offers easy cover for the underprepared.