The 20% fall from £4.4bn (€5.17bn, $5.5bn) in the 2009–10 tax year to £3.5bn in 2014–15 was contrasted with the 9% jump of £23bn over the same period for all income tax payers, the public accounts committee’s report on ‘Collecting tax from high net worth individuals’ said.
“HMRC publishes little information about the approaches it takes or the number of criminal investigations and prosecutions in progress. The lack of transparency leaves the department open to the perception that, in its dealings with taxpayers, there is one rule for the rich and another for everyone else.”
Public accounts committee chairwoman Meg Hillier said HMRC’s claims about its success “just don’t stack up”.
HMRC defends strategy
But an HMRC spokesman strongly defended its own strategy saying there was “absolutely no special treatment” for the wealthy.
“We give them additional scrutiny, with one-to-one marking by HMRC’s specialist tax collectors, to ensure that they pay everything they owe, just like the rest of us do.”
He added that the department carefully scrutinised arrangements between football clubs and their employees to ensure the right tax was paid.
“In recent years we have identified more than £158m additional tax yield from clubs, players and agents,” he said.
However, the committee said the rules on ‘image rights’ as they are applied in football and some other industries are being exploited, even though HMRC had a specialist team looking at the potential abuse of the rules relating to image rights, described as the most significant tax risk amongst footballers.
“The rules allow income for image rights to be treated as a separate revenue stream. Particularly when combined with ‘non-dom’ status, this creates an incentive for the individual to maximise the proportion of income that is deemed to be for image rights in order to reduce their tax liability.
“HMRC told us that it has open enquiries about image rights on 43 footballers, eight agents and 12 clubs. We were appalled to hear that not all football clubs are providing HMRC with data under a voluntary agreement struck with the English Premier League.”
It said the UK government should take urgent action to address image rights taxation, which must be included in the next Finance Bill to ensure this tax revenue is no longer lost.
No need to declare
Another concern in the report was that collecting the right amount of tax from high net worth individuals is made harder because they do not have to declare details of their wealth, unlike some other countries, such as Australia and Japan.
The report also said HMRC has not been tough enough in dealing with tax evasion and avoidance by the very wealthy, and “it does not know whether its activities are enough to deter non-compliant behaviour”.
HMRC had told the committee that almost all of the very wealthy have professional advisers to deal with their tax affairs.
“But this sees many of them paying the wrong amount of tax. HMRC has enquiries open into about a third of all high net worth individuals at any one time, and is investigating cases with a potential value of £1.9bn”, the report said.
