October 31, 2011 7:44 pm

Tax team to hunt wealthy evaders

Owners of overseas property will be the first target of a 200-strong team of investigators set up to identify wealthy tax evaders, Revenue & Customs said on Monday.

It unveiled a new “affluent” unit, which will focus on the tax affairs of all but the richest of those earning more than £150,000.

Commodity traders are to be the Revenue’s next target, after it collected intelligence that not all traders were declaring taxable income. Holders of offshore accounts will come under scrutiny later next year.

The tax affairs of the very wealthiest 5,000 individuals, with at least £20m in assets, are handled by a specialist group known as “the high net worth unit”. It has generated an extra £86m of revenues in 2009-10 and £162m in 2010-11.

Danny Alexander, chief secretary, announced the launch of the unit which will deal with the 350,000 richest people, at the Liberal Democrat conference in September when he said “the small minority who don’t pay what they owe” would be found and made to pay their fair share.

David Gauke, financial secretary to the Treasury, said the new unit was expected to raise £560m in the next few years, adding: “The government is committed to tackling tax evasion and avoidance across all areas of the economy. That is why we allocated HMRC £917m to reduce the tax gap over the next four years in the last spending review. This new team is part of that investment.”

The expected revenues are a relatively small share of the £7bn a year that Revenue & Customs is due to raise by 2014-15 from closing the tax gap. The tax gap was estimated to be £35bn in 2009-10, with individuals accounting for 11 per cent of it, according to official figures. It said the team was being brought together from officials across the department and did not involve new recruitment. The new unit would also draw on expertise from across Revenue & Customs, including those who deal with corporate entities, residence and domicile issues and trusts and estates.

Revenue & Customs said it would use sophisticated data mining techniques on publicly available information to identify individuals who own property abroad.

It would then use risk assessment tools to identify people who did not appear able legitimately to afford the property, as well as those who did not appear to be declaring the correct income and gains from the property.

Fiona Fernie of BDO, the accountancy firm, said the redeployment of staff would sharpen the Revenue’s focus. “They are moving staff from where they are not fully occupied to where they will make more impact.”

Last month, Revenue & Customs announced the launch of a new offshore co-ordination unit which will become fully operational this month. The unit is investigating a number of suspected tax evaders who are clients of HSBC’s private Swiss bank.

The issue of how rich individuals and corporations are taxed is politically charged. George Osborne, chancellor, justified his austerity plan on the basis that the burden would be fairly shared across society. The government views cracking down on evasion as an effective way of raising revenues and increasing the fairness of the tax system.

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