Wealthy individuals are getting preferential treatment from the taxman which has helped them to reduce their tax bill by a total £1 billion in five years, a parliamentary report has found.
In a damning report, the Public Accounts Committee (PAC) has slammed the way HM Revenue & Customs (HMRC) collect taxes from the very wealthy, saying their strategy leaves them open to the suggestion that wealthy individuals “get help with their tax affairs that is not available to other taxpayers”.
Criticising HMRC for allowing footballers and entertainment stars to exploit rules on ‘image rights’, the committee has urged the organisation to be more transparent about what it does, and to do more to tackle tax avoidance and evasion.
Over the last eight years HMRC has run a specialist unit to collect tax from anyone worth more than £20 million, assigning them a ‘customer relationship manager’ to administer their tax affairs.
But over the last five years, the tax take for this group has dropped by a fifth, equivalent to £1 billion, even as the tax take for the general population has risen by £23 billion.
Phone calls and discussions between HMRC staff and wealthy taxpayers are not routinely recorded – unlike those between the department and ordinary taxpayers – leading to an impression that the organisation provides an “overly close and inappropriate service to the wealthy”.
And the committee expressed “alarm” that at any one time around a third of the wealthy individuals are under investigation; in 2015-16 assessing cases with a combined potential value of £1.9 billion.
Yet there has been just one criminal prosecution for tax avoidance in the last five years, and in the same period HMRC issued 850 penalties with a combined total value of £9 million – an average penalty of just £10,500 each.
Meg Hillier MP, Chair of the PAC, said: “HMRC’s claims about the success of its strategy to deal with the very wealthy just don’t stack up.
“The tax take for this group of people has fallen by £1 billion since HMRC set up its dedicated unit. At the same time, income tax paid by everyone else has risen by £23 billion.
“Cosy terms such as ‘customer relationship manager’ and HMRC’s reluctance to be open add to the picture of arrangements that, while beyond the reach of ordinary taxpayers, are also ill-suited to the increasingly sophisticated methods the super-rich can use to reduce the tax they pay.
“If the public are to have faith in the tax system then it must be seen to have fairness at its heart. It also needs to work properly. In our view HMRC is failing on both counts.”
The committee has called on HMRC to address its practices to ensure a level playing field between the super rich and everyone else, noting in their report: “By being more transparent about its work, seeking new powers where necessary, and delivering on its plans to get tougher with those who break the rules, HMRC could collect more cash and must do more to give the public greater confidence that there is not one set of rules for the rich and another for everyone else.”