29% increase in extra tax collected by HMRC through investigations into High Net Worths

Publications that covered this story include The Times on 28 July 2018.
  • Controversial tools enable HMRC to collect tax before inquiries are concluded

The amount of extra tax collected by HMRC through investigations into High Net Worths and other wealthy individuals jumped 29% to £1.2bn* last year, up from £919m in 2016/17, our research shows.

HMRC have been ramping up investigations into High Net Worths following a 2017 Parliamentary report which found that HMRC’s crackdown on this taxpayer group was not as successful as it could have been.

The report concluded that HMRC could collect more tax from High Net Worths if it was tougher in its approach. In the report, MPs called on HMRC to:

  • Conduct more investigations into High Net Worths and impose more penalties as not enough is currently being done to change behaviour
  • Impose greater penalties on High Net Worths to act as a deterrent
  • Focus on particular classes of High Net Worths, such as professional footballers

Andrew Snowdon, partner in our London office and Head of Tax, comments: “HMRC see High Net Worths as a segment of the market that it can target in a more persistent and aggressive manner than other categories.”

“Given that there is little public sympathy for tax avoidance amongst the wealthy, HMRC know that its tough approach towards this group of taxpayers is unlikely to be reined in.”

“HMRC are using every tool in its toolbox against High Net Worths, including controversial APNs which allow it to collect large amounts of disputed tax before an investigation is concluded or a tribunal has agreed that HMRC can take the tax. APNs are heavy-handed but very lucrative for HMRC.”

Taxpayers have 90 days after receiving an Accelerated Payment Notice (APN) to pay the disputed amount and cannot appeal.

“Data on taxpayers’ offshore bank accounts is now being fed through to HMRC from tax havens as part of a global transparency drive and HMRC can use this data for its investigations into High Net Worths. HMRC will receive data from another wave of countries later this year.”

“HMRC’s hunger for more data on taxpayers is reflected in its latest proposals which would allow it to collect data from any business or organisation without any oversight – an alarming prospect.”

“Although HMRC’s aim to maximise revenues is important, it needs to be careful. Ultra-High Net Worths are extremely mobile and too tough a tax regime may impact the UK’s attractiveness as a centre for High Net Worths – which could be damaging both to the economy and tax revenues.”

*Compliance yield from investigations into ‘self-assessment non-business’ by Wealthy & Mid-Sized Business Directorate