Tax unit targeting Britain’s wealthy raises an extra half-billion dollars

A specialized unit within the U.K. revenue authority that targets the tax arrangements of Britain’s wealthiest taxpayers has raised an extra 416 million pounds (US$508 million) in the tax year 2015-16 but more should be done, a report by the U.K. National Audit Office said.

The amount comes in addition to any voluntary declarations of taxes made by these taxpayers.

HM Revenue and Customs estimates there are 6,500 high net worth individuals with more than 20 million pounds in assets in the U.K.

About a third of Britain’s wealthy are under investigation in cases where the HMRC does not understand or agree with the position taken by the taxpayer.

However, the authority said it recognizes that the examined tax risks relate mainly to tax avoidance and the legal interpretation of complex tax issues rather than tax evasion.

Most of the specialized unit’s work in terms of the 1.9 billion pounds in tax at issue focuses on marketed avoidance schemes used by about 15 percent of high net worth individuals.

HMRC established the specialist unit in 2009 to manage the tax affairs of high net worth individuals.

“The tax affairs of the wealthiest in society are complex, making it harder for HMRC to ensure that they are paying the right amount of tax. HMRC’s specialist team gives it a better understanding of the tax affairs and behaviors of these taxpayers,” said Amyas Morse, head of the National Audit Office.

“While the yields from HMRC’s work in this area have increased, it needs to evaluate what approaches are the most effective and to understand the outcomes it achieves.”

Although the high net worth unit raised more than double the amount of the 2011-12 tax year and it exceeded its internal target of 250 million pounds for the current tax year, a report by the National Audit Office said that as the specialist unit expands, HMRC needs to do more to identify the most effective approaches to maximizing the tax revenue paid by the very wealthiest people in the U.K.

In 2014-15, U.K. high net worth individuals paid more than 4.3 billion pounds in tax.

The group, which represent about 0.02 percent of taxpayers, paid 1.3 percent of the total income tax revenue and 15 percent of capital gains taxes raised.

Specialist team for fraud

HMRC said it prioritizes the recovery of tax where it identifies fraud and uses civil investigations in most cases. Where high net worth individuals are suspected of tax fraud, their case is passed to a specialist team within HMRC which examines whether the evidence is sufficient to merit a criminal, rather than civil, investigation.

In the past five years, HMRC has investigated and closed 72 cases relating to high net worth individuals. Seventy of these were investigated with civil powers, raising 80 million pounds in compliance yield, including penalties. Two cases were criminally investigated and passed to the Crown Prosecution Service, one of which was taken forward and successfully convicted. As of October 2016, HMRC was criminally investigating a further 10 high net worth individuals.

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