The number of overseas investors confessing to tax evasion in the UK has more than quadrupled to 338 this year from 78 in the previous year, according to UHY Hacker Young.

The national accountancy group says that many of these disclosures are likely to be from overseas investors in buy-to-let property who are coming clean about unpaid tax on their rental income.

Data from estate agents and tax authorities overseas have helped HMRC to put pressure on overseas investors in UK property, which has been scrutinised more than ever since the Russian invasion of the UK and the fast-tracked Economic Crime Act.

UHY Hacker Young says, over the last two decades, UK buy-to-let properties have become increasingly popular investments amongst wealthy investors from Hong Kong, Singapore and mainland China, with many UK new build developments actively marketed in those jurisdictions.

The company says that more tax evaders are confessing that they have underpaid tax after receiving ‘nudge’ letters from HMRC outlining that they suspect that they have not been paying all the tax they owe.

Using unprecedented amounts of data at its disposal, HMRC is identifying and tracking down those individuals, both in the UK and abroad, that they think have evaded tax.

The firm says online estate agents such as Purplebricks and OpenRent, as well all traditional lettings agencies, are obliged to provide HMRC with a list of rental properties and landlords. This data is then run through Connect, HMRC’s AI system, to target individuals who have let out properties without reporting their rental income.

UHY Hacker says HMRC has also been using the huge amount of data it gets from tax authorities in other countries via the Common Reporting Standard (CRS) to collate information on overseas individuals who own properties in the UK, helping HMRC spot landlords who receive their rental income into bank accounts overseas without paying tax.

The non-ministerial government department also has teams reviewing data from tenancy deposit schemes and the Land Registry to cross-reference landlords against those who report income on their properties.

Tax evasion can lead to potential criminal prosecution while penalties for underpaid tax can be up to 200% of the tax due. That said, those who come forward voluntarily to make a disclosure are likely to face a lesser penalty.

UHY Hacker Young recommends that anyone who thinks that they might not have paid the correct tax in the past to seek expert advice before informing HMRC.

“Overseas buy-to-let investors are discovering that they cannot hide income from HMRC,” Neela Chauhan, Partner at UHY Hacker Young, said.

“The wealth of data at HMRC’s fingertips means that it’s not ‘if’ but ‘when’ unpaid tax is discovered. It’s far better to come forward to confess than wait to be found out – the penalties can be enormous.”