Out-Law / Your Daily Need-To-Know

Tax yield from enquiries into the country's wealthiest taxpayers increased by 10%, says HMRC

Out-Law News | 23 Apr 2013 | 9:15 am | 2 min. read

The unit dealing with the UK's wealthiest taxpayers brought in a record £220 million of extra tax last year. This represents an increase in its yield from tax enquiries by 10 per cent in the 2012/13 tax year, according to a news release issued by HM Revenue & Customs (HMRC).

HMRC's High Net Worth Unit (HNWU) deals with the tax affairs of people with assets in excess of £20 million.

The unit raised £200 million in 2011/12. In 2010/11 the unit collected an extra £162 million and in 2009/10 it collected an additional £83 million.

Tax expert Ray McCann of Pinsent Masons, the law firm behind Out-Law.com, said that "HMRC continues to squeeze more out of the rich, although at a slower rate of increase than the year before. This suggests they are still focusing on legacy issues, but are operating at near capacity or have not identified that many new taxpayers to work on."

McCann said that "the introduction of the annual tax on enveloped dwellings may add extra impetus to the unit. Wealthy taxpayers holding high value residential property through a company will now need to file a return and pay an annual charge. HMRC is likely to pick these up in order to investigate the underlying structure to check for errors or omissions. The additional scrutiny from HMRC may prompt new enquiries in relation to domicile and remittance issues".

A new annual tax on enveloped dwellings (ATED) applying to residential properties valued at more than £2 million held by companies or other 'non-natural persons' came into force on 1 April. The amount of ATED depends on the value of the property on 1 April 2012, or its purchase price if it is acquired after this date. ATED of £15,000 a year is payable for a property valued between £2 million and £5 million; £35,000 for a property worth £5 million to £10 million and £70,000 for a property worth between £10 million and £20 million.

The HNWU was established in 2009 and has raised a total of £665 million in tax over the last four years as a result of enquiries, which is in addition to the taxes HMRC normally collects from this group of wealthy individuals. HNWU Head, Martin Randall, said that “the tax affairs of the richest people in the country can be complex as they have large tax bills, and that’s why we’ve focused resources on getting their tax right. The majority of the wealthiest taxpayers play by the rules, paying the right tax at the right time, but we take action against the minority who don’t.”

In January, HMRC announced that it was to recruit an additional 100 tax inspectors to its Affluent Unit. At the same time the Affluent Unit's remit was expanded to examine the tax affairs of those with more than £1 million in private wealth.

Research by Pinsent Masons found a 53% rise in the number of prosecutions relating to tax fraud begun by HMRC last year; up from 157 in the tax year ending March 2011 to 240 in the tax year ending March 2012.