Posted on 19 December 2016
Whenever we watch or read the news, we are inundated with images and stories of those who have been caught avoiding paying their taxes.
The UK has employed a variety of tactics to endeavour to gather the due monies, for example, taking away personal income tax allowances and removing pension allowances from the ‘well off’. The new target for greater scrutiny is those classed as having High Net Worth (HNW).
In 2009, HMRC set up a special HNW tax unit. This was aimed at anyone resident in the UK with a wealth of £20m or more. The unit provided around 6,500 HNW people with a relationship manager they could deal with directly. This made sense, as HNW individuals’ tax affairs are generally highly complex, requiring greater understanding and it enabled HMRC to assess more accurately the correct amount of tax to be paid.
The figures revealed that this system has proved fruitful. In 2014/5 HMRC claimed £4.3bn from HNW taxpayers compared with £4.716bn in 2015/6. This figure accounts for 1.3% of the total UK income tax and NI bills, combined with 15% of the Capital Gains Tax bill.
However, the worry HNW individuals have is whether they are being treated fairly, and whether full consideration is being given to the complexity of their tax affairs. The wording of the guidelines HMRC follow is potentially confusing, and with 6000 issues under enquiry by HMRC for more than a year (with 4000 of those having been open for more than 3 years) it is understandably an area of concern.
HMRC are openly clamping down on individual and business tax returns, and their performance targets are becoming more rigorous. Since the summer 2015 budget, when HMRC received an additional £800 million to invest in compliance and tax evasion work, it hopes to recover £7.2 billion in extra tax by the end of 2020/21. It also aims to significantly boost the number of criminal investigations opened.
This, in conjunction with the fact that taxpayers will have to pay a fee to take HMRC to tribunal in the case of a dispute, is raising some concerns with accountants and tax advisors. The proposed fees range from £20 for appeals against fixed term penalties of £100 or less, to £2,000 for an appeal hearing in the Upper Tribunal or Chancery Court. It is estimated that the fees will deter taxpayers from appealing a decision from HMRC.
The need for everyone to have their affairs in order to ensure they pay the correct amount of tax, or to protect themselves from tax investigations, is evermore imperative.
Smith Cooper have an experienced team on hand to help you with your tax planning. If you require assistance please contact our Tax team.