HMRC has been targeting wealthy UK taxpayers with increasing vigour.
Enquiries range from information from the National Crime Agency (NCA) aimed at tackling Unexplained Wealth Orders (UWOs), to basic financial data obtained under the international automatic exchange of information (Common Reporting Standard).
There is also anecdotal evidence that HMRC is challenging the domicile status of wealthy UK residents, and that they face a war of attrition.
Post-Brexit, the UK will be keen to attract foreign investment, while HMRC is tasked with undertaking ever more complex enquiries.
In 2020 the taxman will continue to focus resources on checking the tax position of wealthy and affluent taxpayers.
Policing the affairs of the wealthy
To police the affairs of the wealthy, HMRC created a special High Net Worth unit to monitor the UK’s richest individuals – those with assets of at least £20m.
The justification given was that these individuals contribute significant amounts of tax each year, their affairs are often complex, and they have the funds and opportunity to engage in tax planning to mitigate the amount of tax they pay.
HMRC’s High Net Worth Unit looks after the affairs of 6,500 people.
Many of the 6500 have chosen to move to the UK and may have complex tax affairs, with investments and interests beyond our boundaries.
HMRC recognises that the rules around tax residency and domicile are complicated and mistakes can be made, which in turn can lead to the loss of tax.
Even where advice was taken this can easily become out of date, and HMRC polices the system to look for ‘low hanging fruit’.
| All non-domiciled individuals | ||||
| Tax year | Number of individuals | Total UK Income Tax | Capital Gains Tax | National Insurance contributions |
| £m | £m | £m | ||
| 2007-08 | 137,000 | 6,309 | 370 | 2,099 |
| 2008-09 | 123,100 | 5,530 | 78 | 1,795 |
| 2009-10 | 120,300 | 6,145 | 147 | 1,970 |
| 2010-11 | 115,200 | 6,275 | 165 | 1,883 |
| 2011-12 | 113,300 | 6,395 | 127 | 2,107 |
| 2012-13 | 117,000 | 6,487 | 147 | 2,126 |
| 2013-14 | 120,400 | 6,834 | 177 | 2,314 |
| 2014-15 | 123,000 | 6,826 | 253 | 2,259 |
| 2015-16 | 119,000 | 6,787 | 308 | 2,218 |
| 2016-17 | 90,500 | 6,851 | 394 | 2,244 |
| 2017-18 | 78,300 | 5,399 | 208 | 1,932 |
The most complex and serious tax enquiries are the responsibility of the Fraud Investigation Service, which has offices in most major cities in the UK.
The enquiries are normally opened under Code of Practice 8 (complex tax enquiries) and Code of Practice 9 (suspected tax evasion).
HMRC is also focused on targeting wealthy UK residents who have retained their non-UK domicile status and yet remained here for a significant time.
The investigations are very intrusive and focus on trying to establish that the taxpayer has put down roots in the UK and adopted it as their home.
These enquiries have been described by advisers as a ‘war of attrition’ since HMRC’s appetite for information is difficult to satisfy.
The nature of a tax enquiry has evolved into a focused, risk-based investigation.
While HMRC is required to objectively review the tax return, it must be increasingly difficult to do this when significant tax risks have been identified.
This focus and complexity apply to investigations of all types and at all levels, whether this is a Compliance office or Fraud Investigation Service enquiry.
Legal gateways
HMRC has a network of legal gateways that allows it to legally gather information from other departments and offices.
