Tax man turns probe on the rich, famous & entrepreneurs to find unpaid tax

Investigations into the tax affairs of people in the public eye raised £494 million for HM Revenue and Customs in the past year.

The money came from HMRC tackling tax avoidance schemes.

Tax lawyers are warning the pursuit of the rich and famous is likely to continue not so much due to the money raised, but because the headlines encourage other taxpayers to settle their bills.

Paul Noble, tax director at solicitors Pinsent Mason explained that media coverage of tax avoidance schemes involving celebrities triggered HMRC into launching more investigations into the financial affairs of musicians, sports stars, actors and comedians.

Specialist task force

A specialist task force was formed in 2014 brief to stop the marketing and use of tax avoidance schemes, while another unit looks at the returns of 6,000 wealthy taxpayers who have a net worth of £20 million or more.

These taxpayers contribute between £3 billion and £4 billion a year as income and capital gains tax.

The government also authorised new powers for HMRC so the task forces could demand payment up front from wealthy taxpayers investing in avoidance schemes.

The burden of proof was shifted from HMRC showing the schemes were illegal to taxpayers proving they worked. Meanwhile, any tax avoided is paid and refunded once the courts have made a decision.

Thousands of cases cleared

“These cases represent only a tiny amount of the tax collected each year, they do attract a lot of attention in the media, which helps HMRC,” said Noble.

“Because of the headlines, I have no doubt that these inquiries will continue. The new powers have also made a difference, allowing investigators to clear a backlog of thousands of cases.

“However, these new powers are far-reaching and we have to ensure that HMRC only uses them in cases that try to abuse of the tax system.”

HMRC has also seen efficiency improve with the advent of new powers.

In 2014, the high net worth unit recovered £18 in unpaid tax for every £1 spent on tax investigations. This improved by 66% last year to a return of £29 for every £1 spent.