The public accounts committee (PAC) inquiry into high net worth individuals (HNWIs) and HMRC looked at the work of the specialist unit set up in 2009 to collect tax people who have wealth of more than £20m and who are each assigned a 'customer relationship manager' to administer their tax affairs.

The committee expressed alarm that HMRC has around one-third of these individuals under enquiry at any one time, and is investigating cases with a potential value of £1.9bn. It highlighted the fact that ‘the amount of tax paid by this very wealthy group of individuals has actually fallen by £1bn since the unit was set up’, from £4.4bn in 2009–10 to £3.5bn in 2014–15.

The report states: ‘We are concerned that HMRC could not explain why income tax receipts from high net worth individuals has fallen by £1bn (20%) since 2009–10, while income tax from all taxpayers has increased by £23bn (9%) over the same period.’

In particular, the committee says HMRC should assess what more it could do to deter very wealthy taxpayers from bending or breaking the law, highlighting changing behaviour that has seen avoidance ‘moving from off the peg marketed tax avoidance schemes to complex bespoke schemes’.

The committee also concluded the taxation rules for 'image rights', for example in sport and the entertainment industry, are being exploited and wants the government to take urgent action to address this.

MPs want HMRC to consider what further powers could help it improve its understanding of the very wealthy, and formally evaluate the effectiveness of the high net worth unit.

PAC says the lack of transparency about the tax arrangements for HNWIs has eroded public trust in a fair tax system, and says the help made available to them suggests ‘they get help with their tax affairs that is not available to other taxpayers’.

The report states: ‘The term customer relationship manager gives a misleading impression of what these staff do, and risks sending out the wrong message to other taxpayers about extra help being available to the wealthy.

‘HMRC repeatedly told us that it does not give advice to taxpayers. However, we were not convinced by its assertion that there is a clear line between giving its view on potential transactions and giving tax advice, and we do not think there is enough clarity about what customer relationship managers can and cannot do.

‘In addition, while calls from most taxpayers to HMRC call centres are recorded routinely, meetings and phone calls with high net worth individuals are not recorded.’

PAC’s recommendations include the suggestion HMRC should revise and publish guidance to remove any scope for ambiguity about what staff in its high net worth unit can do. It should change the name of its customer relationship managers to something that better describes what they do, and does not suggest an overly close and inappropriate service to the wealthy.

Meg Hillier, PAC chair, said: ‘HMRC's claims about the success of its strategy to deal with the very wealthy just don't stack up.

‘Cosy terms such as “customer relationship manager” and HMRC's reluctance to be open add to the picture of arrangements that, while beyond the reach of ordinary taxpayers, are also ill-suited to the increasingly sophisticated methods the super-rich can use to reduce the tax they pay.

The PAC report found that HMRC is hampered by not having the power to demand more information about what assets high net worth individuals hold, and by the way certain tax rules have been set and interpreted, such as the complex rules on image rights.

Hillier said: ‘HMRC must play a stronger role in identifying tax measures which are not being used as Parliament intended and push harder for reform where the rules are open to abuse.’

PAC’s report concluded that ‘by being more transparent about its work, seeking new powers where necessary, and delivering on its plans to get tougher with those who break the rules, HMRC could collect more cash and must do more to give the public greater confidence that there is not one set of rules for the rich and another for everyone else’.

In a statement, HMRC said: 'There is absolutely no special treatment for the wealthy, and in fact we give them additional scrutiny, with one-to-one marking by HMRC’s specialist tax collectors, to ensure that they pay everything they owe, just like the rest of us do. We have secured an additional £2.5bn from the very wealthiest since 2010.

'The NAO commends this approach as being in line with international best practice and confirms that HMRC has increased the amount of tax we collect or secure from the very wealthy that would have otherwise gone unpaid.'

PAC’s report, Collecting tax from high net worth individuals, is here.