Tax  

Will we see an activist HMRC in 2020?

  • Describe how HMRC is tackling wealthy people
  • Describe how HMRC goes about its investigations
  • Explain the importance of keeping up to date advice
CPD
Approx.30min
Will we see an activist HMRC in 2020?

HMRC has been targeting wealthy UK taxpayers with increasing vigour.

Enquiries range from information from the National Crime Agency (NCA) aimed at tackling Unexplained Wealth Orders (UWOs), to basic financial data obtained under the international automatic exchange of information (Common Reporting Standard).

There is also anecdotal evidence that HMRC is challenging the domicile status of wealthy UK residents, and that they face a war of attrition.

Post-Brexit, the UK will be keen to attract foreign investment, while HMRC is tasked with undertaking ever more complex enquiries.

In 2020 the taxman will continue to focus resources on checking the tax position of wealthy and affluent taxpayers.

Policing the affairs of the wealthy

To police the affairs of the wealthy, HMRC created a special High Net Worth unit to monitor the UK’s richest individuals – those with assets of at least £20m.

The justification given was that these individuals contribute significant amounts of tax each year, their affairs are often complex, and they have the funds and opportunity to engage in tax planning to mitigate the amount of tax they pay.

HMRC’s High Net Worth Unit looks after the affairs of 6,500 people.

Many of the 6500 have chosen to move to the UK and may have complex tax affairs, with investments and interests beyond our boundaries.

HMRC recognises that the rules around tax residency and domicile are complicated and mistakes can be made, which in turn can lead to the loss of tax.

Even where advice was taken this can easily become out of date, and HMRC polices the system to look for ‘low hanging fruit’.

 All non-domiciled individuals   
Tax yearNumber of individualsTotal UK Income TaxCapital Gains Tax

National Insurance contributions

  £m£m£m
2007-08137,0006,3093702,099
2008-09123,1005,530781,795
2009-10120,3006,1451471,970
2010-11115,2006,2751651,883
2011-12113,3006,3951272,107
2012-13117,0006,4871472,126
2013-14120,4006,8341772,314
2014-15123,0006,8262532,259
2015-16119,0006,7873082,218
2016-1790,5006,8513942,244
2017-1878,3005,3992081,932

The most complex and serious tax enquiries are the responsibility of the Fraud Investigation Service, which has offices in most major cities in the UK.

The enquiries are normally opened under Code of Practice 8 (complex tax enquiries) and Code of Practice 9 (suspected tax evasion).

HMRC is also focused on targeting wealthy UK residents who have retained their non-UK domicile status and yet remained here for a significant time.

The investigations are very intrusive and focus on trying to establish that the taxpayer has put down roots in the UK and adopted it as their home.

These enquiries have been described by advisers as a ‘war of attrition’ since HMRC’s appetite for information is difficult to satisfy.

The nature of a tax enquiry has evolved into a focused, risk-based investigation.

While HMRC is required to objectively review the tax return, it must be increasingly difficult to do this when significant tax risks have been identified.

This focus and complexity apply to investigations of all types and at all levels, whether this is a Compliance office or Fraud Investigation Service enquiry.

Legal gateways

HMRC has a network of legal gateways that allows it to legally gather information from other departments and offices.

CPD
Approx.30min

Please answer the six multiple choice questions below in order to bank your CPD. Multiple attempts are available until all questions are correctly answered.

  1. What has HMRC done to police the wealthy?

  2. What is the connection between HMRC and unexplained wealth orders?

  3. HMRC can gather information from other departments, true or false?

  4. What is the new problem facing clients with wealth overseas?

  5. Which of the following will HMRC NOT use when looking for inconsistencies in information ifor non-Uk residents?

  6. Tax advice can get out of date, true or false?

Nearly There…

You have successfully answered all the questions correctly, well done!

You should now know…

  • Describe how HMRC is tackling wealthy people
  • Describe how HMRC goes about its investigations
  • Explain the importance of keeping up to date advice

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