HMRC is running formal enquiries on a third of high net worth individuals (HNWI) with the aim to collect £1.9bn owed in taxes from potential tax avoidance schemes, according to a National Audit Office (NAO) report
Of the £1.9bn tax that could be due from HNWI, £1.1bn comes from the use of marketed avoidance schemes, with the NAO saying that around 15% of HNWI have participated in at least one scheme.
Despite this, only two HNWI have been criminally investigated over the past five years with only one successful conviction. In October 2016, a further 10 HNWI were being criminally investigated by HMRC.
In 2015-16 HMRC’s specialist unit recovered £416m from HNWI, this is separate from the £4.3bn in tax that was voluntarily declared in 2014-15. This included £3.5bn in income tax and national insurance (1.3% of total revenue) and £880m in capital gains tax (15% of all CGT).
HNWI often have complex tax affairs which makes it challenging for HMRC to understand and assess if there are any risks.
In 2009, a specialist unit was set up by HMRC to manage the tax affairs of HNWI, with it estimating that there are currently 6,500 HNWI, totalling 0.02% of all taxpayers.
Formal enquiries can take a while to resolve with 6,000 issues open for more than 18 months in which 4,000 have been open for more than three years.
Amyas Morse, head of the National Audit Office, said: ‘The tax affairs of the wealthiest in society are complex, making it harder for HMRC to ensure that they are paying the right amount of tax. HMRC's specialist team gives it a better understanding of the tax affairs and behaviours of these taxpayers.
‘While the yields from HMRC's work in this area have increased it needs to evaluate what approaches are the most effective and to understand the outcomes it achieves.’
NAO’s report, HMRC’s approach to collecting tax from high net worth individuals, is available here.
