The Public Accounts Committee (PAC) has published a report, 'Collecting tax from high net worth individuals'. It calls into doubt HMRC's relationship with high net worth individuals (HNWIs).
The PAC notes that since HMRC’s High Net Worth Unit was set up in 2009, tax receipts from from this group have fallen by £1 billion. There is concern that the public will interpret that as meaning that there are ‘one set of rules for the rich and another for everyone else’. The report concludes that:
- HMRC’s lack of transparency has eroded public trust in a fair tax system and makes it more difficult for the department to explain what it does well.
- HMRC’s approach to dealing with the very wealthy suggests that they get help with their tax affairs that is not available to other taxpayers.
- HMRC has not been tough enough in dealing with tax evasion and avoidance by the very wealthy, and it does not know whether its activities are enough to deter non-compliant behaviour.
- The rules on ‘image rights’ as they are applied in football and some other industries are being exploited.
- HMRC has not yet assessed the strengths and weaknesses of its approach to collecting tax from high net worth individuals or considered the different approaches it could take.
Recommendations
The PAC beleives that HMRC/Government should:
- Publish more information about its work generally alongside its next annual report and at regular intervals thereafter (e.g. the number of criminal investigations in progress).
- Explain how income tax receipts have fallen by £1 billion for high net worth individuals while income tax paid overall has increased by £23 billion.
- Revise and publish guidance to remove any scope for ambiguity about what staff in its high net worth unit can do.
- Change the name of its customer relationship managers to something that better describes what they do, and does not suggest an overly close and inappropriate service to the wealthy.
- Assess what more it can do to deter very wealthy taxpayers from bending or breaking the law (reporting back to the PAC by July 2017).
- Consider what further powers could help it improve its understanding of HNWIs, including requiring these taxpayers to provide HMRC information about their assets (again report back to the PAC by July 2017).
- Take urgent action to address image rights taxation (including it in the next Finance Bill).
- Conduct a formal evaluation of the high net worth unit and routinely monitor, analyse and report on the tax receipts from this group of taxpayers.
