HMRC ramps up investigations into High Net Worth individuals – up 26% last year

HMRC is ramping up investigations into high net worth individuals and other sophisticated tax evaders, with 430 investigations opened into this taxpayer group last year, up 26% from 340 the previous year. This is a clear sign of intent from HMRC and wealthy taxpayers can expect more of the same this year.
 
HMRC has been heavily targeting wealthy individuals since the Panama Papers scandal in 2016. This was the leak of 11m documents from a Panamanian law firm providing information on the tax affairs of high net worth and high-profile individuals.
 
The documents revealed the extensive use by high net worth individuals of offshore bank accounts in overseas territories with low tax rates. The documents also revealed the details of how wealthy individuals were using offshore companies to hold assets.
 
In 2016, HMRC set up the Panama Papers Task Force to trawl through the information leaked and identify wealthy individuals to investigate. It is estimated investigations linked to the Panama Papers led to £190m in extra tax being collected last year alone.
 
However, investigating High Net Worth and wealthy taxpayers has since got easier for HMRC – it no longer needs to rely on massive citizenship leaks for information on taxpayers’ affairs.
 
HMRC is now fed data on taxpayer’s offshore affairs from over 100 countries; this data includes bank account statements, company directorships, property purchases and investments. This data comes through every year.
 
So, what is the outlook for High Net Worth and wealthy taxpayers? This taxpayer group can expect ever more scrutiny of their affairs and an increasingly aggressive HMRC.
 
It is likely that HMRC will be looking to increase tax receipts to cover for coronavirus-driven public expenditure – spending on stimulus and response packages is expected to reach £200bn this year alone, which is roughly 30% of the UK’s yearly tax receipts.
 
This means HMRC will be closely watching to see if taxpayers make any mistakes on their returns and any evidence that tax has been underpaid.
 
High Net Worth and wealthy taxpayers therefore need to ensure that their tax affairs are in order. A simple mistake on a tax return could lead to HMRC deciding to open a wider review into that person’s affairs.
 
As accountants and clients will know, tax investigations can be very costly and stressful. PfP are specialists in this area and you can protect your clients against the cost of most tax investigations by offering a Tax Investigation Service. To find out how we can help, contact info@pfp.uk.com.