According to a report published today by the National Audit Office, which looks at HMRC's approach to collecting tax from the UK's wealthiest individuals, HMRC is currently running a formal enquiry on around a third of high net worth taxpayers, with a potential value of £1.9 billion. £1.1 billion of this relates to the use of marketed avoidance schemes; around 15% of high net worth individuals have used at least one scheme.
Formal enquiries occur where HMRC does not understand or agree with the position taken by a taxpayer. These enquiries can take a long time to resolve with 6,000 issues under enquiry open for more than 18 months, 4,000 of which have been open for more than three years.
The report looks at HMRC's approach to collecting tax from those with a net worth of wealth of at least £20 million and confirms that approximately 6,500 people (or roughly 0.02% of all tax payers) come within this category. (The threshold has been lowered to net worth of £10 million during 2016-17 which means that more high net worth individuals will find themselves coming under closer scrutiny from HMRC).
In 2014-15, high net worth individuals paid over £4.3 billion in tax - £3.5 billion in income tax and national insurance (1.3% of total revenue for those taxes) and £880 million in capital gains tax (15% of total revenue). Although the figures for inheritance tax are monitored in a different way, the report confirms that HMRC has identified 161 inheritance tax records relating to high net worth individuals' estates between May 2014 and April 2016 on which inheritance tax of £183 million has been paid to date.
HMRC has identified that the risks from high net worth individuals relate primarily to tax avoidance and the legal interpretation of complex tax issues, rather than tax evasion.
High net worth individuals often have complex tax affairs and they generally have more choice over how they manage their income and assets than the average taxpayer. It can be challenging for HMRC to understand their tax affairs and assess if there are any risks to address.