Tax  

One in three HNWIs under investigations by HMRC

One in three HNWIs under investigations by HMRC

One in three high net worth individuals is under investigation by HM Revenue & Customs over potential tax bills worth £1.9bn, a report by the National Audit Office has revealed.

The report examined HMRC's approach to the approximately 6,500 people in the UK with wealth worth £20m or more.

HMRC collected £4.3bn from this group in the 2015 to 2016, including £3.5bn in income tax and £880m in capital gains tax, the report found.

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However, it said HMRC was investigating cases that could bring in an additional £1.9bn in tax revenue, relating to one in three HNWIs.

By far the majority of that £1.9bn was thought to be through marketed tax avoidance schemes.

HMRC said £1.4bn in HNWI tax revenue was at risk through these schemes.

That figure represented 10 per cent of the total tax at risk through such schemes across all users.

But HNW individuals accounted for just 1 per cent of total users of schemes.

Another major channel for previously lost HNWI tax revenue was the Liechtenstein Disclosure Facility - which allows people who have undeclared assets in Liechtenstein to declare the money with much softer penalties.

The report found this had brought in £141m in tax revenue from 137 HNWIs.

It found that HMRC's special HNWI unit, set up in 2009, now had 380 staff - meaning that there is one tax official for every 17 HNWIs. 

HMRC assigns a "customer relationship manager" to each HNWI.

The report found that investigations into potential tax evasion tended to take a long time to resolve. It found that 6,000 issues under inquiry had been open for more than 18 months, while 4,000 had been open for more than three years.

The report's release coincided with news that the UK's seven tax and accountancy bodies had updated their Professional Conduct in Relation to Tax (PCRT) code to make it clear that members should not engage or encourage tax avoidance activity.  

HMRC endorsed the new code, which will come into effect in March 2017.

The seven professional bodies were: the Chartered Institute of Taxation; the Association of Taxation Technicians; the Association of Accounting Technicians; the Association of Chartered Certified Accountants; the Institute of Chartered Accountants in England and Wales; the Institute of Chartered Accountants of Scotland; Society of Trust and Estate Practitioners.

james.fernyhough@ft.com