HMRC crackdown on tax-dodging top earners
Taxman hires 100 new inspectors to its Affluent Compliance Team to target top earners who aren't paying enough tax.
HM Revenue & Customs (HMRC) is launching a crackdown on top earners who are not paying their fair share of tax.
The taxman already has a special Affluent Compliance Team, consisting of 200 staff across the UK, who work to ensure “the better off play by the rules”.
What the Affluent Compliance Team does
The unit looks specifically at taxpayers with an annual income of more than £150,000 and wealth of between £2.5 million and £20 million.
However the team is being boosted with the addition of 100 new inspectors. As a result, the unit will now also look into those with wealth in the range of £1 million to £2.5 million.
Who the team targets
According to HMRC, the sort of people that the Affluent Compliance Team targets tend to be those who:
- Habitually use avoidance schemes
- Have a low effective rate of tax across their total income
- Have bank accounts in Switzerland and who appear to be understating their tax liability
- Fail to file their self-assessment tax return on time
- Avoid or evade Stamp Duty on property purchases
- Have UK and offshore property portfolios.
Since its launch the team has brought in an extra £75 million in tax, which HMRC says is well ahead of expectations. It has a target of retrieving £586 million by the end of 2015.
Exchequer Secretary David Gauke said: "The vast majority of people pay their way. Dodging tax is immoral, illegal and unaffordable and the minority who cheat are increasingly finding that, thanks to the work of the Affluent Team, they have made a big mistake."
We are all in it together?
It’s undoubtedly a good thing that HMRC is cracking down on those top earners who find ways to cut their tax bill.
Last year the news was filled with stories about a succession of high-profile figures, from Jimmy Carr to Gary Barlow, who were making the most of a variety of schemes which lowered their tax liabilities. With the economy still on life support, it’s only fair that we all pay our way.
However just as important as tax-dodging top earners are the businesses who appear to be sidestepping their own tax responsibilities. It will be interesting to see how the taxman plans to address that issue in the year ahead.
More on tax
2012's biggest tax cheats named and shamed
Should tax evaders be named and shamed?
Are 'cash in hand' payments morally wrong?
Calls to HMRC cost us £136 million!
How to get your online self-assessment tax return right
Comments
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So what's the upshot? I decided not to pursue any of the less salubrious commercial tax avoidance schemes, as if they are found non-compliant one is still liable for the tax and the exorbitant fees (which wipe out about half the 'tax-saving') and will reluctantly pay up. However my pension contributions will be capped at the maximum to avoid the double-taxation which would otherwise occur. Personally I think the 45% top tax-rate is a masterstroke, as it drops the government's take below that magical half of one's income; I suspect that fewer people will be tempted to use sophisticated avoidance (or outright evasion) measures. I can deal with the fact that someone working part-time and earning £9k pays no tax, that someone in a low-paid job at £18k pays 10%, at £27k it's 13%, but someone earning £118k pays 34% and this is considered 'fair', but to me keeping less of MY money than the government takes can never be FAIR.
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Finding myself now in range of the 'Affluent Compliance Team' maybe I can offer a slightly different perspective... In the past I never considered that I would go looking for 'sophisticated' or 'dodgy' tax avoidance schemes. I thought 40% tax plus 2% NIC was high but reasonable, and the government allowed me to defer tax on my pension pot, paying income tax when I eventually draw it out rather than before I put it in. For me the big psychological barrier is when the government gets to keep more of my income than I do; never mind the 52% marginal rate over £150k, one pays a marginal rate of 62% between £100k and £118k, as the £9k 'tax-free' personal allowance is clawed back... Coupled with pension tax relief being limited to contributions of £50k (£40k from 2014), I went from happily paying 42% tax on an income around £90k plus building a pension pot at £200k per year (yes, I know this is beyond the expectation of most people, but I risked all (and paid myself nothing) building up a business which is now paying back) to facing a tax bill of around £50k MORE than I had been paying. What would you do??? Most of the tax avoidance measures available involve treating yourself as a business, paying Corporation Tax on UK profits (and none on 'overseas' profits such as invoiced from the Channel Islands). For me this is not an option, as my business involves a majority of partners in the USA, and I have no option than to be an employee of the US company, and a resident taxpayer in the UK.
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The powers that be continue to confuse tax evasion with tax avoidance. They fudge the issue to avoid having to accept that it is their inept drafting of laws and regulations that allow potential tax avoiders and their highly paid advisers to make fools of them. Tax avoidance is legal - next they might start casting aspersions on the millions of us that have ISA's. They should clamp down on all tax evaders without mercy but stop trying to deny their own responsibility for allowing tax avoidance schemes to flourish.
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18 January 2013