Changes within HMRC and increased information flows could lead to more individuals being enquired into, with associated professional costs for the taxpayer, and in many cases no additional tax being due to HMRC.
The first change, which happened last year, was that HMRC’s high net worth unit (HNWU) reduced its entry criteria from individuals with wealth greater than £20m to those with over £10m. Previously, the HNWU dealt with just over 6,000 taxpayers who were each assigned a customer relationship manager (CRM) who, in theory, would work with the taxpayer and adviser in order to better understand the often complex affairs of the individual.
While there is little new information on the new number yet, it is likely to be much more than double the previous amount, which will put pressure on the number and available quality of CRMs. HMRC is now targeting 100 criminal prosecutions per annum from this group, rather than two per annum as previously. It will need to go through a lot more initial enquiries to get to that sort of number of prosecutions and the hope is that it will not make unnecessary enquiries to do so.
Common Reporting Standard (CRS) information will be flowing into HMRC from overseas jurisdictions, which HMRC will be matching up with information filed in tax returns. While there will be a window of opportunity running until September 2018 under the 'requirement to correct' regime, anyone failing to correct their UK tax position, particularly in relation to overseas income and gains, will face the full force of HMRC. Again, HMRC will need to carefully consider the information it receives. It is unfortunate that many enquiries are started without thought about the circumstances. For example, individuals may have a bank account in their name which they have not reported as they hold it as trustee, perhaps for a minor child.
While a key role for HMRC is ensuring that taxpayers are paying the right amount of tax, it does need to ensure that its approach to wealthier taxpayers – who are likely to be well advised – is appropriate. It needs to bear in mind taxpayers’ sophisticated affairs and the fact they are likely to have an adviser before going in too heavy-handedly on the suspicion of any wrongdoing.