A report by the U.K.’s National Audit Office (NAO) said that the country’s official tax collection agency is investigating one third of the wealthiest people in the U.K. currently.

The tax accounting of the U.K.’s 6,500 richest individuals is studied by a specialist unit that was launched in 2009 by the tax collecting HM Revenue & Customs (HMRC). Accounting for over £20 million ($24.5 million) worth of assets apiece, this group of rich people makes up only 0.02 percent of the population of the country.

On top of what was paid voluntarily by these individuals, an additional £416 million of tax for collection in 2015 to 2016 was uncovered by the dedicated unit. £200 million was secured by similar investigations four years earlier and this is a more than doubling of that amount. The HMRC’s internal target was of £250 million for the period and this amount was also a sum that came in far ahead of target.

The theme of tax entities keeping a closer watch was not just restricted to the U.K., said Tina Riches, national tax partner at financial affairs adviser Smith & Williamson.

“Across the board all tax authorities are trying to step up a gear in terms of pursuing any taxpayer where they feel they can squeeze some extra tax out of them,” according to Riches.

This mandate was expanded in February 2016 to “maximize revenues due and bear down on avoidance and evasion,” while the first strategic objective for HMRC had been simply to “maximize revenues”, she noted turning to the U.K. specifically.

A notable change of direction for the agency is said ot have been marked by this prioritization to tackle what in some cases may be considered routine tax planning.

The legal interpretation of complicated tax issues rather than outright – and illegal – tax evasion and the discrepancies primarily relate to tax avoidance schemes, the report was keen to emphasize.

With 4,000 now having been open for over three years, investigations can drag on at length due to the complexity of some cases and the high amount of capital at stake.

As reporting is not required for most of the information about their wealth, including sources of income or assets owned, further complexities concern even the initial identification of high net worth individuals.

The unit’s uncovering of an additional 1,000 people with net worth above the £20 million cut-off point is evidence of the risk to HMRC of targets slipping under the radar.

The newly introduced powers to demand accelerated payments, where taxpayers are required to pay a requested amount in advance of the final agreed tax charge being decided and while the case remains open, was responsible for some of the money collected, Riches cautioned about the haul reported by the NAO and drilling down into the numbers.

Compared with £75,000 for the broader population, HMRC had issued 1,400 accelerated payment notices to high net worth individuals with the average value of such a notice to a high net worth individual being around £450,000 by March 2016, the report notes.

(Adapted from CNBC)

Categories: Regulations & Legal, Strategy