Tax

UK Tax Office Rebuts Report's Claims Of HNW Bias

Josh O'Neill Assistant Editor 30 January 2017

UK Tax Office Rebuts Report's Claims Of HNW Bias

The UK's tax collector HMRC has responded to claims by the Public Accounts Committee that it favours high net worth individuals when collecting customs.

HMRC has hit back at a report by parliament's spending watchdog that claimed the UK's wealthiest people get preferential treatment and are not properly pursued for outstanding tax bills.

HMRC's failure to clamp down on rich tax dodgers is undermining confidence in the whole system, the Public Accounts Committee said in its highly critical report. 

The report, released last week, examined HMRC's specialist unit, which collects tax from individuals with a net worth of more than £20 million ($25.1 million). Calculations by tax officials showed that there were around 6,500 high net worth individuals in 2015-16, accounting for about one in every 5,000 standard taxpayers. 

However, the report found that “the amount of tax paid by this very wealthy group of individuals has actually fallen by £1 billion since the unit was set up” in 2009. The committee pointed out that advice from officials to wealthy taxpayers was not recorded. “While calls from most taxpayers to HMRC call centres are recorded routinely, meetings and phone calls with high net worth individuals are not recorded,” the report said.

Responding to the Public Accounts Committee's findings, 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 £2.5 billion from the very wealthiest since 2010.”

The UK's tax collector continued: “The National Audit Office 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.” 

Still, the report found that HMRC had a “dismal record” of successfully prosecuting the very wealthy for tax fraud in criminal courts. 

In the five years to 31 March 2016, HMRC completed 72 fraud investigations into high net worth individuals, but just two were dealt with using its civil powers. Of these cases, only one resulted in a successful criminal prosecution, according to the report.

Of the 850 fines issued to high net worth individuals since 2012, the average charge was £10,500 – a figure the committee said was likely to be too insignificant to act as a deterrent.

Meanwhile, the report also highlighted concerns about “potential abuse” of image rights by top footballers and entertainers to minimise their tax liabilities. According to its findings, HMRC had “open enquiries” relating to the use of image rights by 43 footballers, 12 clubs and eight agents.

Committee members reportedly said they were “appalled” to learn that not all clubs were providing HMRC with the data it required under the terms of a voluntary agreement with the Premier League. 

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