Have you had an enquiry opened or received a letter from HMRC? Even if the answer is not yet, would you know what to do if you did? Are you prepared?
The High Net Worth Unit (HNWU) was set up in 2009 to review the personal tax affairs of the 5,000 wealthiest people in the UK, each with a total wealth of at least £20m.
The HNWU has brought in over £500m in extra tax (over and above amounts declared on tax returns) since it was set up. In 2011/12 the tax collected was £200m, up from £162m in 2010/11.
The HNWU comprises around 380 staff working in a number of locations across the UK.
The Affluent Unit
Initially the Affluent Unit (AU) was charged with reviewing the tax affairs of the UK's top one percent of wealthy individuals, who each have wealth of at least £2.5m and/or income of more than £150,000.
The unit was expanded to deal with taxpayers with a net worth of £1m instead of the previous £2.5m. This significantly widened the number of taxpayers to be reviewed by this unit. The AU now covers taxpayers with income over £150,000 or wealth between £1m and £20m.
By the end of December 2012 the AU had brought in an extra £75m in tax with a target of £586m by the end of 2015.
The AU comprises around 200 staff based in a number of locations across the UK.
The OCU is coordinating HMRC’s crackdown on offshore tax evasion. The OCU comprises around 100 offshore tax investigators and their responsibility includes the UK Switzerland Tax Agreement that entered into force on 1 January 2013. HMRC states that the OCU "will look to fully exploit the increasing amount of offshore information at HMRC's disposal, including bank account data."
HMRC’s ‘Connect’ system contains more than a billion records including taxpayer records as well as information from the internet, other government departments, within the private sector and information from other countries.
HMRC highlights that the system holds data including income, interest from bank accounts, ownership of businesses and data from tax authorities in other countries. The system uses analytics to identify connections that show true levels of income and spending that can reveal those evading their taxes.
HMRC have already used Connect in conjunction with European Union Savings Directive data gathered from participating states, writing to thousands of taxpayers about their offshore assets and are planning another wave of similar letters.
In 2014 the government passed powerful new legislation to collect the millions of pounds of tax postponed pending tribunal hearings where HMRC consider that a tax avoidance scheme has been used and challenged by HMRC. Where an arrangement carries a ‘DOTAS’ number, or where an arrangement is similar to one that HMRC have already successfully challenged at tribunal, HMRC are able to issue an ‘accelerated payment notice’ or ‘follower notice’ respectively. These notices ultimately allow HMRC to collect the tax before the outcome of any hearing is known. KPMG can help clients in receipt of these notices. Implications for high net wealth individuals.
Consequently there is a high likelihood of an enquiry from HMRC for high net wealth individuals (HNWIs). HNWIs and their advisors need to be prepared. By undertaking reviews of their tax affairs at an early stage, in addition to substantially minimising future compliance costs, HNWIs can gain a sense of certainty and peace of mind that a strategy is in place should HMRC write to them.
KPMG is able to provide advice on whether a client’s tax affairs are likely to be robust if HMRC challenged the position. Where a review is undertaken, if HMRC was then to ask additional questions we should be able to help achieve early resolution of the issues as much of the work will already have been undertaken. Engaging our help from an early stage should help ensure that clients are prepared should an enquiry arise.
For those already under enquiry or who have received a letter from HMRC about overseas assets, our team is on hand to assist. Our focus is on ensuring that any HMRC intervention is handled efficiently and effectively. KPMG was recently instructed to act in a long running investigation which the client’s existing tax advisors were unable to resolve, where the client was incurring substantial fees over a period of approximately three years. Our private client team and tax investigation specialists were able to offer a multi-disciplinary approach, using a combination of thorough understanding of the tax legislation and engagement management, giving HMRC the necessary assurance at each stage that all risks had been cleared. Within four months of KPMG’s involvement the matter had been resolved.
For more information please speak to your local KPMG Private Client Advisor or contact Greg Limb.
This article represents the views of the author only, and does not necessarily represent the views or professional advice of KPMG in the UK.