HMRC is aiming to recover £1.9 billion in tax owed by the UK's wealthiest individuals, but how easy is it to get?
HMRC has said that it’s chasing £1.9 billion in tax owed by the super-rich.
The National Audit Office said that HMRC’s specialist unit recovered £416 million in 2015 from 6,500 “high net worth individuals” with wealth of more than £20 million.
There are 6,500 super-rich taxpayers in the UK, making up around 0.02% of the tax-paying population. They collectively pay £3 billion-£4 billion a year in personal income and Capital Gains Tax.
The £416 million is in addition to tax these rich taxpayers voluntarily declare, totalling £4.3 billion in 2014-2015.
HMRC is investigating risks from high net worth individuals with a potential value of £1.9 billion. This figure is an initial estimate of the tax that could be due and covers more than one tax year.
£1.1 billion of this relates to the use of marketed avoidance schemes with around 15% of high net worth individuals using one such scheme. HMRC says that risks from high worth individuals mostly relate to tax avoidance and the legal interpretation of complex tax issues, rather than tax evasion.
A HMRC spokesman said: "We have an excellent record of winning avoidance cases; over the last two years we have won 71 out of 81 cases, protecting £6.6 billion in tax. It’s important to note that even where there isn't a criminal conviction, we still pursue every penny of tax owed with fines on top. No one gets away with cheating their taxes no matter how rich they are."
How does HMRC recover the tax?
Each high worth individual is assigned a customer relationship manager by HMRC who is responsible for "building an understanding of each taxpayer’s affairs and behaviours" and to liaise with their tax agent on the amount they owe.
Officials can start a formal inquiry into a case, which can take up to 44 months from the start of an enquiry to it getting to court.
In many cases when there’s sufficient evidence, the most appropriate action is to pursue criminal charges.
The NAO says that HMRC is running criminal investigations into 10 high net worth individuals in relation to illegal offshore tax evasion, although only one has been prosecuted since 2010.
HMRC is aiming to increase the number of prosecutions to 100 by 2020.
The specialist unit reportedly recovers £29 for every £1 spent, according to the NAO.
"Time consuming"
It’s not always that easy for the taxman though. Wealthy individuals often have complex tax affairs involving different countries, so it can be challenging to understand their tax affairs and if there is actually anything dodgy which needs to be addressed.
HMRC spokesman Patrick O’ Brien explains the complexity of handling the tax affairs of high net worth individuals: “The customer relationships managers are not like some bank relationship managers. These are first class honours graduates, highly trained tax inspectors poring over every aspect of the wealthy’s tax affairs, looking for any sign the correct amount of tax is being paid, Its’ micro analysis of their tax affairs, no normal taxpayer gets that level of scrutiny.”
“Wealthy people are under so much more scrutiny than other people because there’s much more money involved.”
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