UK: HMRC ramps up efforts against wealthy tax evasion

HM Revenue & Customs’ tax unit, known for targeting the affluent, has more than doubled its revenue from wealthy individuals in a single year, amassing over £1.5 billion in 2023-24 amidst an intensive clampdown. The Wealthy and Mid-Size Business Compliance (WMBC) team, often referred to by insiders as a “special investigations” squad, focuses on high earners and those with assets worth millions.

Before accounting for a notable £652 million settlement with billionaire Bernie Ecclestone, the ex-chief of Formula One, the team collected nearly £848 million. This staggering figure represents a significant increase from the £713 million raised the previous year, as revealed by data acquired through a Freedom of Information request by Pinsent Masons.

Tax professionals are highlighting this uptick as a deliberate move, cautioning that HMRC is actively targeting the wealthy as the government seeks to address deficits in public funding.

“HMRC have been set some very hard targets for extra tax collection by the chancellor. It is hard to see how they can achieve those targets without a sharp rise into tax investigations into the wealthy,” Ian Robotham, legal director at Pinsent Masons, commented to the Financial Times.

Last year, taxpayers earning over £200,000 or possessing assets beyond £2 million contributed £119 billion in personal taxes, which astonishingly accounts for 25 per cent of all personal tax income in the UK, averaging £140,000 per individual.

Nimesh Shah, chief executive of accountancy firm Blick Rothenberg, stated: “I know from experience over the past five years, that there has been a focus from HMRC on wealthy individuals, as there is a perception and understanding that there is tax risk within the wealthier population.”

These figures follow closely behind a National Audit Office report which warns that the scale of tax lost to evasion and avoidance by the rich may be far higher than previously believed. The report revealed that total revenue collected from wealthy individuals rose to £5.2 billion in 2023-24, up from £4 billion the previous year.

One factor contributing to this surge is the implementation of a powerful AI-driven data system known as Connect. This system cross-references information from bank accounts, credit cards, property records, even travel data – all in an effort to detect undeclared income or suspicious patterns.

“People do still underestimate the sophisticated data mining that HMRC does,” said Dawn Register, tax dispute partner at BDO.

“Most inquiries are data led, they’re not random. HMRC is often checking for technical errors and the wealthier the individual they find an error for, the more tax yield they’re going to get.”

She noted that many current investigations are focusing on offshore assets and residency status – areas where the tax rules can be complex and easy to misstep. Robotham added that HMRC has strengthened its capabilities by utilising AI tools and employing hundreds of staff to handle compliance.

HMRC said: “It’s our duty to ensure everyone pays the right tax under the law, regardless of wealth or status. The government is delivering the most ambitious ever package to close the tax gap and bring in an extra £7.5bn for public services per year by 2029-30.”