Accountants say that Britain may follow in the footsteps of the Internal Revenue Service in the US and require every citizen to file a tax return every year, regardless of their country of residence.

This option could appeal to a coalition government after last week’s indecisive general election result as it would be a way of raising a substantial amount of revenue and would not cost existing taxpayers anything extra.

If a ‘citizenship tax’ was introduced, expatriates who currently pay little or no tax to HMRC could find that continuing to hold a UK passport would cost them much more than the current £77.50 issue price.

At the moment almost 1 in 10 British citizens live abroad, a total of 5.5m expatriates, the new tax could be worth billions to the government.

It has generally been the case, as far as HMRC are concerned, that if British citizens are living overseas then they are more than likely paying tax elsewhere.

However, HMRC have recently been involved in litigation with a number of British citizens who claimed to be domiciled elsewhere.

This has given HMRC the feeling that people who are working overseas are avoiding tax.

A citizenship tax would certainly increase the amount of tax that HMRC receive but it has to be considered whether they have the ability to police this.

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