18/06/24

UK: Number of wealthy individuals suspected of ‘serious tax evasion’ almost doubled says Pinsent Masons

As published on: ifamagazine.com, Tuesday 18 June, 2024. 

The number of wealthy individuals HMRC suspects of ‘serious tax evasion’ jumped 95% to 172 individuals in the last 12 months*, up from 88 in the previous year, says multinational law firm Pinsent Masons.

Figures obtained by Pinsent Masons show a sharp increase in the number of individuals and businesses referred to HMRC’s Suspected Fraud Management Team (SMFT) by investigators in its Wealthy and Mid-sized Business Compliance Directorate which deals with High Net Worths. The SMFT ‘triages’ referrals made by HMRC teams when they suspect tax fraud or serious tax evasion.

HMRC is ramping up its compliance drive against the UK’s wealthiest individuals as in an effort to recoup tax from undeclared overseas income. The tax authority estimated the ‘tax gap’ – the difference between the tax HMRC is theoretically owed and the amount of tax it is paid – to be approximately £36bn (HMRC Measuring Tax Gaps 2023).

Steven Porter, Partner and Head of Tax Disputes and Investigations at Pinsent Masons, says: “HMRC now has a long list of wealthy taxpayers they think are failing to declare overseas income. They are now prime targets for investigations.”

“Wealthy individuals, including those who earn significant income from overseas assets, should seek specialist financial advice to ensure they pay what tax is due – and thus avoid a costly investigation, fines and the threat of a prison term.”

Pinsent Masons warn that there is likely to be a further increase in investigations into High Net Worth individuals if there’s a change of Government within the next year.

Says Steven Porter: “Following the next election, the UK’s wealthiest individuals can expect an even tougher crackdown by the taxman.”

HMRC’s compliance drive accelerates

Figures from HMRC show that the total number of individuals (i.e. including both wealthy and non-wealthy individuals) and businesses referred to the SMFT from all HMRC compliance divisions increased 26% last year to 857 in 2022/23, up from 681 in 2021/22.

Says Steven Porter: “A referral to the Suspected Fraud Management Team typically means there is a real concern over a company or individual’s tax position. In many cases, a tax investigation is on the just over the horizon.”

HMRC’s recent successes in tax investigations saw it rewarded with an above-inflation budget increase for its tax investigations work last year, from £975m to £1.1bn. The increased compliance drive is being aided by HMRC’s AI-powered Connect system and better information as a result of increased cooperation with tax authorities in other countries.

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UK Pinsent Masons Tax evasion HMRC

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