Is HMRC really going soft on high net worth individuals?

31 January 2017

Andrew Hubbard

I remember being taught at school about the dangers of the 'post hoc ergo propter hoc' fallacy: in other words just because A occurs before B it does not mean that A is the cause of B. So the fact that birds start singing just before the sun rises does not mean that the singing causes the sun to rise.

I was taken back to my schooldays when I was reading the latest report from the Public Accounts Committee (PAC), entitled 'Collecting tax from high net worth individuals'. The report notes the following:

  • HMRC set up the High Net Worth Unit in 2009 specifically to target the tax affairs of the richest taxpayers; and
  • tax receipts from high net worth individuals declined by 20 per cent between 2009 and 2015.

Now to be scrupulously fair to the report it does not actually say that the second bullet point is a consequence of the first, but it comes pretty close to it; and it certainly seems to encourage the reader to make the connection which is concerning. It is all part of the narrative which the PAC is trying to develop that HMRC has gone soft on rich taxpayers and that they get an easier ride than the ordinary man and woman in the street.

On the same theme it expresses concern that meetings between taxpayers and relationship managers within HMRC are not routinely recorded whereas phone conversations on HMRC’s general helplines are recorded. Again this seems to imply, without actually saying so, that there is something fishy here, and that deals are being done with high net worth taxpayers which can escape scrutiny because they are somehow off the record. For a start this confuses the very different role of meetings and phone calls, but more importantly ignores the fact that full notes of meetings with taxpayers are taken by HMRC as a matter of course.

It is certainly not my experience that high net worth individuals get a soft touch from HMRC. Indeed I would expect my colleagues in this, and other firms, to agree with me that HMRC’s approach has got much tougher. If the possibility of cosy deals ever existed (which I doubt) they are certainly not available now. And if we look at the statistics, a large proportion (28 per cent) of total income tax receipts is still paid by the top one per cent of earners.

Of course you may say that is special pleading on behalf of tax advisers, and that we can’t bring a proper sense of perspective on all of this. Perhaps the system is biased in favour of the ultra-rich. If there is unfair distortion in the way that HMRC operates then it should be investigated; and if proved to exist, addressed. But please let’s have proper rigorous scrutiny based on firm evidence: veiled innuendo or suggestion benefits nobody.

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