Government failings to fairly tax the super-rich is undermining confidence in the system, according to a damning report from the Commons Public Accounts Committee of MPs, who have now called for a tougher approach when tackling contributions from the wealthiest.
HMRC has operated a specialist unit to collect tax from anyone who is worth more than £20m since 2009. Of those individuals each is assigned a “personal customer relationship manager to make sure they pay the right amount of tax”, according to the report.
A report from the committee found that HMRC had a "dismal record" in prosecuting the super-rich for tax fraud in the criminal courts.
In the five years to March 31 2016, the UK tax authority completed just 72 fraud investigations into those categorised as being within that bracket, with only two having been dealt with outside its civil powers. Of those, only one case resulted in a successful criminal prosecution.
Since 2012, HMRC issued only 850 penalties totalling £9m to such individuals - an average penalty of £10,500 each.
Figures since 2009 stated that tax paid by these multi-millionaires fell by a fifth, or £1bn, during the five-year period while state contributions from the ordinary tax payer leaped by £23bn.
Phone calls and discussions with these individuals were not recorded or subject to the same scrutiny as those between HMRC staff and ordinary taxpayers in what was described as an“overly close and inappropriate service to the wealthy”.
Footballers and actors were singled out as having exploited the sale of their image rights to avoid tax using the current system.
Summarising the report, the committee said: “HMRC needs to be tough, and be seen to be tough, on tax avoidance and evasion, to ensure that everyone, particularly the very wealthy, pays their fair share of tax.
"In 2009, HMRC set up a unit to focus on the tax affairs of ‘high net worth individuals’, who are the wealthiest people in the UK.
“By being more transparent about its work, seeking new powers where necessary, and delivering on its plans to get tougher with those who break the rules, HMRC could collect more cash and must do more to give the public greater confidence that there is not one set of rules for the rich and another for everyone else.”
Jonathan Bartley, co-leader of the Green Party, said: “Wealth inequality in Britain has soared on the Tories’ watch. We need action to tackle the tax avoidance industry as well as a wealth tax on the top earners if we are to redress the balance.”