The latest report by the UK parliament Public Accounts Committee says the tax collection agency, HMRC, should do more to deter very wealthy taxpayers from "bending or breaking the law," highlighting changing behavior that has seen avoidance "moving from off the peg marketed tax avoidance schemes to complex bespoke schemes."
Our Report on collecting tax from the very wealthy has been published. Read in full and Chair's comments https://t.co/lwKrf9AKvG pic.twitter.com/sE8Wna9cMl
— Public Accounts Comm (@CommonsPAC) January 27, 2017
One of the key schemes the report criticizes is "image rights" exploited by sportsmen and women and those in the entertainment world. HMRC told the committee that case law "established the principle that if you are involved in a sport, you can receive essentially two income streams: one for the playing of sports, and another for the use of image rights."
The report said most people who believe their image rights have a market value have created companies that receive the payments for those rights. HMRC said that a significant number of footballers in the UK are not domiciled there. This means they can incorporate their image rights outside the UK and that payments will be made to companies outside the United Kingdom as well.
HMRC's claims about strategy to deal with very wealthy just don't stack up — PAC Chair @Meg_HillierMP. More https://t.co/lwKrf9AKvG #tax pic.twitter.com/VPLqLFd10B
— Public Accounts Comm (@CommonsPAC) January 27, 2017
The report also reveals that HMRC provides a "customer relationship manager" to each high net worth individual — which is help that other taxpayers do not get.
"The tax affairs of high net worth individuals can be highly complicated and they will inevitably need more assistance to resolve issues before submitting their returns. But drawing the line between this and tax advice is always going to be difficult and must be subject to greater scrutiny," Alex Wild, TaxPayers' Alliance research director told Sputnik.
"But it has become increasingly difficult for HMRC to do their job given the sheer quantity of complex tax legislation being passed by Parliament. The revenue costs of tax reliefs for fashionable industries like films are often far higher than the Treasury forecasts due to poor tax design and their subsequent exploitation by those fortunate enough to have tax advisers," he said.
Failing Tax Agency
Since 2009, HMRC has operated a specialist unit to collect tax from high net worth individuals: people who have wealth of more than US$25 million and who are each assigned a "customer relationship manager" to administer their tax affairs.
The Committee expressed alarm that HMRC has around one-third of the super-rich under inquiry at any one time and highlights the fact that "the amount of tax paid by this very wealthy group of individuals has actually fallen by US$1.25 billion since the unit was set up."
HMRC must do more to give the public greater confidence that there is not one set of rules for the rich & another for everyone else https://t.co/B0QSKpYLWi
— MegHillierMP (@Meg_HillierMP) January 27, 2017
"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," said Meg Hillier MP, Chair of the committee.
