I am often asked by potential clients if claiming Capital Allowances will result in an HMRC investigation. Many of these are deemed to be ‘wealthy individuals’ in the eyes of HMRC.
This is how HMRC treat them….
HMRC’s corporate report on this, published today, is below:-
1.How we deal with wealthy individuals
It’s our job to make sure that both businesses and individuals pay the right amount of tax. To do this we understand and respond to risks in the tax system by making sure that our compliance work covers the full range of taxes and duties that we manage. This briefing looks at how we deal with wealthy individuals to help them comply with their tax obligations and to challenge those who don’t play by the rules.
2.What do we mean by wealthy individuals?
We mean those with a net worth of £20 million or more who make up the 6,200 wealthiest individuals in the UK. Our High Net Worth Unit (HNWU) is a specialist division that was set up in 2009 to handle the tax affairs of the UK’s richest people. We focus our resources on this high-value group because their tax affairs are complex and they collectively pay £3 to £4 billion a year in personal income and Capital Gains Tax.
Because wealthy individuals pay billions of pounds in tax each year, we assign them a specific customer relationship manager (CRM) who has detailed oversight of their tax affairs, deals with their tax agents and develops an in-depth understanding of whether they pose any risk of not paying what they owe. This means we talk individually with each customer and their advisers to understand their tax affairs and make sure they pay the right amount of tax at the right time.
CRMs are supported by teams of specialist technical advisers, where complex issues require a more in-depth analysis of relevant tax law. This ensures we apply the law in an even-handed way and that complex disputes are resolved in accordance with our code of governance.
The unit has a number of specialist teams including, for example:
- Finance team – focuses on individuals connected to the finance sector. For example, hedge funds, private equity and banking entities
- Rising Stars team – deals with people who have rapidly increasing wealth, indicating that they will meet the HNWU’s wealth criteria in the next few years
- Business Investment Tax Relief team – handles claims for Business Investment Tax Relief from individuals not living in the UK who propose to invest in UK businesses. Not all requests are approved as some do not meet the required criteria
- Analysis and Intelligence Unit – focuses on using data and analysis to ensure that we understand the behaviour and financial structures of wealthy individuals, and where their interests lie
- Dispute Resolution team – works to resolve disputes between HMRC and our wealthy individuals in line with our litigation and settlements strategy
4.Making sure we collect the right amount of tax
By making sure our customer relationship managers work closely with this group of people, we are able to focus more time and effort on those wealthy individuals who we believe pose a significant risk of not paying what they owe through tax avoidance or evasion.
We take direct action by challenging those who fail to file tax returns and those who submit incorrect tax returns. We now issue what are known as ‘follower notices’ and ‘accelerated payment’ notices so that the disputed amount of tax in an avoidance scheme is paid upfront to HMRC while the dispute is resolved. We also take disputes to tax tribunals when we’ve been unable to agree the amount of tax to be paid in line with our litigation and settlements strategy.
The work of the High Net Worth Unit has brought in more than £1 billion in additional revenue since it was formed in 2009. The unit has increased the revenue it’s brought in year-on-year to £268 million in 2013 to 2014 – a 20 per cent increase on the year before.
Additional revenue collected by the High Net Worth Unit:
|2009 to 2010||£85 million||£80 million|
|2010 to 2011||£162 million||£153 million|
|2011 to 2012||£200 million||£195 million|
|2012 to 2013||£222 million||£200 million|
|2013 to 2014||£268 million||£210 million|
We’ve also seen an increase in wealthy individuals filing their tax returns on time so that in five years the number of outstanding tax returns has reduced from 11.9 per cent to 3.4 per cent. A total of 96.4 per cent of wealthy individuals file online – an increase of ten per cent in four years.