Britain: 400 people earned more than £10 million a year, only 65 of them paid income tax

Taxman targets 100,000 top earners to claw back millions

More than 200 years after rules on tax status were introduced to meet the cost of the Napoleonic wars, a new battle is being waged against Britons and foreign workers.

Scrutiny of the tax affairs of wealthy individuals, foreign workers, entrepreneurs and celebrities has gathered pace since the Labour Government came to power. High earners are being pursued with new vigour by the authorities, which are under immense pressure to bolster Treasury coffers and deliver hundreds of millions of pounds.

Their persistence is paying off. According to data obtained under the Freedom of Information Act by McGrigors, a law firm and tax investigation specialist, compliance activity focusing on high-net-worth taxpayers and wealthy foreigners resident in Britain by Revenue & Customs (HMRC) has yielded astonishing results: in 2008-09, tax teams netted £373 million. Four years before that they collected only £81 million.

The figures represent the work of the Revenue’s expatriate and complex personal returns teams, now replaced by one dedicated team. Launched last year, the high-net-worth unit is made up of about 500 staff, each dealing with just ten wealthy taxpayers.

The department has not specified the level of wealth for individuals to fall under scrutiny, but accountants suggest it could be in excess of £10 million. Figures published in 2007 showed that while about 400 people earned more than £10 million a year in Britain, only 65 of them paid income tax.

Anyone falling under the high-net-worth unit’s spotlight can expect a thorough review of their financial dealings and assets. Of particular interest to investigators will be offshore trusts and companies. The new approach is based on the Australian model for taxing the richest people, which is understood to have raised about £1.5 billion.

Penalties for tax evasion are increasing. Accountants are reporting fines of up to 70 per cent of the tax due, even for relatively small outstanding amounts. But this is just one of a series of measures introduced over the past couple of years as part of the Revenue’s tougher stance on tax avoidance.

Sue Holmes, partner of national tax investigations at Smith & Williamson, an accountancy firm, said: “It’s been clear that the Revenue has been getting stricter and stricter. They have been spending more money on compliance and training their staff better. And if you think about the current economic situation, it’s far easier to go after those people who really have large amounts of money, rather than the guy who runs the local garage.”

The Revenue has set aside more than £1 billion for enforcement and compliance over the current tax year, a quarter of its total budget. New, expensive computer systems allow it to target individuals more effectively and have enabled officials to redeploy staff to tax investigations. In 2008 the Revenue looked into the affairs of more than 62,000 people. The 2009 figure is expected to be much higher.

The Treasury has promised to protect £5 billion of tax receipts a year from erosion by avoidance and evasion. If recent activity is anything to go by, it may well be on target to do just that.

February 18, 2010
Helen Nugent

Source: The Times

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