Tax crackdown by HMRC unit nets 60% more money, report says

HMRC poster on tax avoidance Image copyright HMRC

A crackdown on tax avoidance and evasion by people who HM Revenue & Customs call "mass affluent" netted 60% more money in 2014, a report says.

HMRC's Affluent Unit covering UK residents on annual incomes over £150,000 - or wealth over £1m - raised £137.2m in tax, up from £85.7m in 2013.

The report was written by law firm Pinsent Masons, using data from HMRC.

Critics said the unit, which works with HMRC's High Net Worth team covering the super-rich, could collect much more.

The Affluent Unit, set up in 2011, doubled in size in 2013 with the recruitment of an additional 100 tax inspectors. About 500,000 UK residents fall into its remit.

"This surge in extra revenue from Affluent Unit tax investigations serves as a reminder that HMRC is widening its lines of inquiry," said Pinsent Mason's head of litigation and compliance James Bullock.

"People who would just consider themselves moderately successful professionals and business people are now also coming under the scrutiny of HMRC's specialist units," he said.

He added that the tax office had been given new powers to pursue tax avoidance in what looked like "a much more aggressive approach to prosecutions targeted at professionals and entrepreneurs".

'Poor success rate'

HMRC's ability to investigate people has been made easier by a computer system called Connect. Costing £45m, Connect was launched in the summer of 2010 and designed by the defence contractor BAE Systems.

The computer system collects data on people from multiple sources, including banks, local councils, and even social media.

Treasury minister David Gauke said that the jump in extra tax being collected shows that the Affluent Unit was "a success... We are determined to give HMRC the powers and support that they need".

He said there was a change in the public mood towards tax avoidance and evasion. "The public expect people to pay the right amount of tax under the law to help fund our services."

He added: "HMRC are winning a lot of their court cases, and we are seeing that a lot of people are preparing to pay up rather than litigate for years."

However, tax expert Richard Murphy, from Tax Research, said: "HMRC is supposed to collect £167bn of income tax this year, of which at least a quarter will be from the top 1% of income earners.

"In that case, to collect just £127m as a result of investigations into this group when the official tax gap is £35bn suggests that much less attention is given to them than any other group."

He added: "The investigation success rate is way below anything that could be expected given that we know tax avoidance is mainly undertaken by the wealthiest.

"If these statistics prove anything it is that HMRC need many more resources to collect tax from those most likely to owe it."

Last year, the Treasury unveiled controversial plans to give HMRC the ability to withdraw outstanding tax directly from people's bank accounts.

Following opposition, it was agreed that tax inspectors would hold a face-to-face meeting with taxpayers before any money is taken.

The Direct Recovery of Debt plans are due to come into force this year.

More on this story