UK's richest people getting special deal from HMRC, warns watchdog

The very wealthy are paying less tax while ordinary taxpayers see their bills increase, an influential parliamentary committee has warned.

The Public Accounts Committee said Government’s claims to be cracking down on tax avoidance by the richest “just don’t stack up” and that the shift was happening despite supposed moves to make the wealthy pay their fair share.

A new investigation by the cross-party committee found that the tax take from very wealthy people had fallen by £1 billion since HMRC set up a dedicated “high net worth” unit to chase unpaid or missing tax from the rich.

Meanwhile the income tax paid by all other taxpayers has risen by £23 billion over the same period.

“HMRC's claims about the success of its strategy to deal with the very wealthy just don't stack up,” Meg Hillier, the MP who chairs the Public Accounts Committee said.

“The tax take for this group of people has fallen by £1 billion since HMRC set up its dedicated unit. At the same time, income tax paid by everyone else has risen by £23 billion.”

The committee’s investigation report says that HMRC’ has eroded public trust in the tax system with a “lack of transparency” and that the treatment of the richest could be “cosy”.

The richest are given help with their tax affairs not available to other taxpayers, the report warns. The MPs call for HMRC to conduct a “formal evaluation” of the “high net worth unit” and report it findings back to the committee.

Ms Hillier continued: “Cosy terms such as ‘customer relationship manager’ and HMRC’s reluctance to be open add to the picture of arrangements that, while beyond the reach of ordinary taxpayers, are also ill-suited to the increasingly sophisticated methods the super-rich can use to reduce the tax they pay.

“If the public are to have faith in the tax system then it must be seen to have fairness at its heart. It also needs to work properly. In our view HMRC is failing on both counts.

“HMRC must play a stronger role in identifying tax measures which are not being used as Parliament intended and push harder for reform where the rules are open to abuse.”

HMRC told the committee that the changes in tax revenue collected over the period examined was influenced by people shifting income between tax years to take advantage of the cut in the top rate of tax from 50 per cent to 45 per cent.

In response to the report, an HMRC spokesperson said there was "absolutely no special treatment" for the wealthiest individuals.

“The vast majority of people in the UK pay all the tax they owe and today the top one per cent of earners pay more than quarter of all income tax," he said.

"There is absolutely no special treatment for the wealthy, and in fact 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. We have secured an additional £2.5 billion from the very wealthiest since 2010.

“The NAO commends this approach as being in line with international best practice and confirms that HMRC has increased the amount of tax we collect or secure from the very wealthy that would have otherwise gone unpaid.”