HMRC closing in on tax evaders
Wealthy people who own overseas property will face extra scrutiny from a new 200-strong team of HMRC investigators and specialists. The first to be targeted will be people with assets worth between £2.5 million and £20 million.
HMRC hopes the new Affluence Unit, which was set up in September 2011, will raise £500 million in extra tax over the next three years by using risk assessment techniques to identify people who are evading tax. After wealthy property owners, the next target will be commodity traders.
The unit has applied data mining processes to information that is publicly available in order to identify individuals who own property abroad. It then uses risk assessment tools to highlight cases where it is unclear how the person could afford to acquire the property, and then to identify those who do not seem to be declaring all their rental income and gains. People who come under enquiry should be prepared to produce documents to verify the source of the funds they used to buy the foreign home.
The unit’s establishment follows the success of a similar unit set up a few years ago to deal with the tax affairs of around 5,000 ‘high net worth’ individuals, defined as those with wealth of more than £20 million. According to HMRC, that unit collected extra tax of £85 million from them in 2009/10 and is on track to gain an extra £162 million for 2010/11.
HMRC is also sorting through a vast amount of information about UK residents with offshore bank accounts, most recently as a result of tax agreements with the Liechtenstein and Swiss governments. UK taxpayers with undeclared investments in Liechtenstein are being encouraged to register under the Liechtenstein Disclosure Facility, which started in 2009 and will run until March 2015.
People who sign up and declare all their income will be subject to a 10% fixed penalty on their underpaid tax instead of the much higher penalties usually charged, or no penalty where they have made an innocent error. Liechtenstein banks will soon write to their UK customers asking them to confirm that they are fully declaring their UK tax liabilities. Those who cannot do so will have to close their accounts.