'Special treatment' saves super-rich £1bn, MPs claim

"Special treatment" by HMRC of the UK's richest people – each worth in excess of £20m – is helping them save £1bn in tax every year, according to a critical report by a committee of MPs.

Parliament's spending watchdog, the Public Accounts Committee, says that in the six years between the 2009/2010 and 2014/2015 tax years, the amount collected from the richest people in society fell from £4.5bn to £3.5bn.

In 2009, HMRC launched a specialist tax advice unit, assigning a "relationship manager" to every high net worth individual – of which there are now around 6,500 – to help avoid mistakes.

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"At the same time income tax paid by everyone else has risen by £23 billion,” Meg Hillier, chairwoman of the committee, said, according to The Times.

The report also says that enforcement levels are poor, pointing out that at any one time a third of all high-net worth individuals are under investigation, but that only 72 cases have been completed in the past five years, with just two resulting in criminal charges.

"Of the 850 penalties issued to the very wealthy since 2012, the average charge was £10,500, a figure the MPs said was unlikely to be a deterrent to multi-millionaires," says the BBC.

HMRC disputes the figures and says the appointment of relationship managers has resulted in £2bn of previously "uncollected" tax being paid. It cannot, however, account for the £1bn drop in overall receipts.

Jon Thompson, head of HMRC, said: "Clearly, some of that is to do with the fact that in April 2010, the headline rate of income tax for this particular group rose from 40 per cent to 50 per cent.

"Some of them took the money early and some deferred. That is not the entire answer though.”

HMRC chasing a third of 'super-rich' over tax avoidance

1 November

Britain's tax watchdog is engaged in formal inquiries into a third of all "super-rich" taxpayers, says The Independent.

The figures are contained in a National Audit Office (NAO) report into the activities of an HMRC specialist unit which exists solely to clamp down on tax avoidance among those with net worth of more than £20m.

It found there are thousands of ongoing investigations, with a potential total of £1.9bn worth of unpaid tax from previous years at stake.

HMRC has now identified 7,500 relevant "high net worth" people - 0.02 per cent all taxpayers. They collectively paid £4.3bn in tax last year, but it should have been a lot more, says the NAO.

Inquiries are opened when HMRC disagrees with voluntary tax declarations or suspects a deliberate attempt to avoid payments. Last year, its super-rich unit collected £416m in undeclared taxes.

That's a pretty good return. The 400-investigator strong department has an internal target of £250m. Law firm Pinsent Masons told the Financial Times that based on its analysis of the figures, it estimates the unit has generated £29 for each £1 spent.

While HMRC's approach was "sensible" and in line with international best practice, said the NAO, it could "increase its effectiveness" by evaluating its overall performance in this area.

Specifically, it criticised the fact only 70 cases have been concluded in the past five years and just two pursued through criminal charges, of which one led to a conviction.

It also highlighted the complexity of the tax issues and law relating to the wealthiest individuals, which means as many as 6,000 cases are still open after 18 months and 4,000 are still active after three years.

In all, there could be 10,000 tax cases ongoing at any one time, with an average of four for each taxpayer under investigation.

According to figures for the 2013/2014 tax year, an estimated £4.4bn is lost to the exchequer each year in illegal tax evasion, in addition to £2.7bn in tax avoidance that HMRC would deem to be in breach of its rules.