Investigations into wealthy individuals yields extra 700m for HMRC

Out-Law News | 02 Sep 2019 | 1:50 pm | 1 min. read

HM Revenue & Customs (HMRC) has recouped a record £1.9 billion through investigations into wealthy individuals in the past 12 months.

Data obtained by Pinsent Masons, the law firm behind Out-Law, shows that HMRC’s yield from these investigations rose 58% in 2018/19 from £1.2bn to £1.9bn.

Tax law expert Steven Porter of Pinsent Masons said global data sharing agreements meant HMRC now had far more data on wealthy individuals, enabling it to identify cases and complete investigations more quickly. As a result it has collected more tax from compliance activities.

Investigations into data leaks such as the Panama Papers, where documents held by an offshore law firm including information on corporate and trust structures were leaked into the public domain, have also led to a rise in income. The Panama Papers investigation has brought in £190m so far, with a further 215 investigations still ongoing.

“HMRC’s data-led approach is proving incredibly effective – the taxman’s reach has never been longer than it is now. HMRC can ask for data on taxpayers from every tax haven and almost every country in the world,” Porter said.

“The surge in yield from investigations may also reflect HMRC’s multi-faceted approach to compliance amongst wealthy individuals. Data is used to cross-check returns and sometimes letters are simultaneously pumped out asking individuals to confirm information they don’t need to confirm – mistakes can easily be made which can leave taxpayers exposes to investigations,” Porter said.

Porter said HMRC’s ‘Connect’ database was also helping in its efforts to gather information from an increasingly wide range of sources. The Connect database is able to cross reference up to 22 billion lines of data including tax returns, property and financial data.

“HMRC’s willingness to not only investigate, but also enforce and prosecute, shows its continued use of the stick over the carrot when pursuing wealthy individuals,” Porter said.

The introduction of the Common Reporting Standard (CRS) in the last few years has helped HMRC’s investigations. Over 100 countries have agreed to share financial data and in 2018 HMRC received information about 5.67 million offshore accounts held by around 3 million UK residents.