HMRC Uses Divorce Proceedings to Investigate Wealthy Taxpayers

Divorce is rarely straightforward — emotionally or financially. For wealthy individuals, however, the stakes are even higher. Beyond the division of assets, divorce proceedings can expose private financial information that HMRC may later use in tax investigations.

As HMRC increases its resources — with £100 million in extra funding and 5,500 new compliance officers — it is turning to civil proceedings, such as divorce cases, as valuable sources of intelligence. For high-net-worth individuals (HNWIs), this means that financial details once thought to be private could trigger scrutiny, penalties, or even prosecution.

Why Divorce Proceedings Are a Goldmine for HMRC

Unlike most legal disputes, divorce cases in the UK require full and frank disclosure of financial affairs.

Key features of divorce financial proceedings:

• Mandatory Disclosure – Both parties must provide a comprehensive account of their assets, income, trusts, and offshore holdings.
• No Right to Withhold – Failure to disclose can result in penalties, adverse judgments, or even imprisonment for contempt of court.
• Document Trail – Bank statements, trust deeds, offshore arrangements, and corporate structures must often be provided.

This transparency, while designed to ensure fairness between spouses, creates a paper trail that HMRC can later review and verify.

Standish v Standish (2025): A Case in Point

On 2 July 2025, the Supreme Court ruled on Standish v Standish, a divorce case involving almost £80 million in assets.

At issue was whether funds transferred into the wife’s name constituted legitimate inheritance tax planning or matrimonial assets. Although intended for an offshore trust, the funds were retained by the wife, sparking litigation.

For HMRC, cases like Standish highlight:

• Inheritance tax planning schemes that may not have been completed.
• Cross-border wealth transfers that raise compliance questions.
• Exposure of offshore structures otherwise hidden from public scrutiny.

While Standish was a high-profile case, the principle applies across many divorces — wealth protection strategies are often revealed in open court.

How HMRC Accesses Divorce Information

HMRC cannot simply demand access to divorce files. However, it can lawfully obtain information through several routes:

1. Open Court Hearings – If financial details are read out or referred to in open court, they become part of the public record. HMRC can then use this information directly.
2. Court Permission – HMRC may apply for permission to access documents disclosed in divorce proceedings, especially if they suggest possible tax fraud.
3. Intelligence Gathering – Even when documents cannot be formally used as evidence, they may inform HMRC’s investigative leads, guiding requests for bank statements or offshore records.

In practice, once HMRC identifies irregularities, individuals may lose the option to use the Contractual Disclosure Facility (CDF) — a mechanism that offers immunity from prosecution in return for full and voluntary disclosure.

Common Triggers for HMRC in Divorce Cases

Divorce proceedings may expose:

• Offshore trusts and accounts – Common in IHT planning but vulnerable to scrutiny.
• Undisclosed income streams – From businesses, partnerships, or investments.
• Artificial wealth transfers – Such as pre-divorce asset shifts to avoid settlements.
• Inheritance tax avoidance schemes – Where intentions were not carried through.
• Cryptocurrency holdings – Increasingly revealed in financial disclosure.

Each of these creates potential red flags for HMRC’s expanded investigations team.

Risks for Wealthy Individuals

For HNWIs, the risks are significant:

• Financial exposure: Undeclared assets or income may result in back taxes, interest, and penalties.
• Loss of CDF protection: Once HMRC has evidence, voluntary disclosure options may no longer be available.
• Criminal investigation: If fraud is suspected, individuals may face prosecution.
• Reputational damage: Divorce disclosures are sometimes reported in the media, amplifying scrutiny.

With HMRC targeting a 20% increase in prosecutions, wealthy individuals engaged in divorce proceedings are a clear focus area.

Proactive Steps to Protect Against HMRC Investigations

1. Regularise Tax Affairs Before Litigation: Ensure all tax planning arrangements — especially involving offshore structures — are compliant before they risk disclosure in court.
2. Seek Specialist Tax Advice: Wealthy individuals should work with advisors experienced in tax investigations, trusts, and international tax compliance.
3. Consider Voluntary Disclosure: If irregularities exist, using HMRC’s voluntary disclosure facility before they are brought to light in divorce proceedings may protect against prosecution.
4. Coordinate Legal and Tax Strategies: Family lawyers and tax advisors should collaborate closely to ensure asset disclosures do not inadvertently trigger HMRC scrutiny.
5. Plan for Inheritance and Wealth Transfers Carefully: Incomplete or poorly documented planning strategies — such as the failed offshore trust in Standish — are particularly susceptible to vulnerabilities.

Divorce proceedings can reveal private financial arrangements, making them public knowledge and providing HMRC with valuable intelligence for tax investigations. With more resources, additional investigators, and a sharper focus on wealthy taxpayers, HMRC is increasingly utilising these disclosures to identify potential tax fraud.

For high-net-worth individuals, the message is clear: do not wait for divorce to expose your tax affairs. Regularising your tax position now and seeking specialist advice is the best protection against costly investigations and prosecution.

Call to Action: Are you concerned that divorce or other civil proceedings could expose your financial affairs to HMRC? Our tax experts provide specialist advice for wealthy individuals, helping you regularise your tax position, defend against investigations, and protect your wealth.