HMRC increasing scrutiny of wealthier taxpayers

Gary Heynes, head of private client at RSM, said the taxman is increasingly looking at the wealthy in the belief more tax can be collected by carefully scrutinising their affairs.

He said HMRC is now targeting 100 criminal prosecutions a year, than than two a year as they had done previously.

Changes within HMRC and increased information flows could lead to more individuals having their tax affairs questioned, said Mr Heynes, with associated professional costs for the taxpayer and in many cases no additional tax being due.

The first change which happened last year was that HMRC’s high net worth unit reduced its entry criteria from individuals with wealth greater than £20m to those with more than £10m.

We administer the laws fairly and objectively, stopping the small minority of taxpayers who are determined to get around the rules.HMRC spokesperson

Previously, according to RSM, the high net worth unit dealt with just over 6,000 taxpayers who were each assigned a customer relationship manager who, in theory, would work with the taxpayer and adviser in order to better understand their often complex affairs.

While there is little new information on the new number yet, Mr Heynes said it is likely to be much more than double the previous amount, which will put pressure on the number and available quality of CRMs.

According to Mr Heynes HMRC is now targeting 100 criminal prosecutions a year from this group, rather than two a year as previously.

Mr Heynes said they will need to go through a lot more initial enquiries to get to that sort of number of prosecutions.

He said: “The hope is that they will not make unnecessary enquiries to do so.

“Common reporting standard (CRS) information will be flowing into HMRC from overseas jurisdictions which HMRC will be matching up with information filed in tax returns.

“While there will be a window of opportunity running until September 2018 under the requirement to correct regime, anyone failing to correct their UK tax position, particularly in relation to overseas income and gains, will face the full force of HMRC.

“Again, HMRC will need to carefully consider the information they receive. It is unfortunate that many enquiries are started without thought about the circumstances.

“For example, individuals may have a bank account in their name which they have not reported as they hold it as trustee, perhaps for a minor child.

“While a key role for HMRC is ensuring that taxpayers are paying the right amount of tax, they do need to ensure that their approach to wealthier taxpayers – who are likely to be well advised – is appropriate.

“They need to bear in mind taxpayers’ sophisticated affairs and the fact they are likely to have an adviser before going in too heavy-handedly on the suspicion of any wrongdoing.”

A HM Revenue & Customs spokesperson: "Enquires are driven by specific risks, and only made after HMRC has examined closely the facts of each case. 

“There is a well-established procedure covering the conduct of enquiries set out in a Code of Practice. 

“We administer the laws fairly and objectively, stopping the small minority of taxpayers who are determined to get around the rules and place an unfair additional burden on those who aren't.”

emma.hughes@ft.com