HMRC increasingly targeting the 'moderately successful' in anti-tax avoidance drive, expert says

Figures obtained by Pinsent Masons, the law firm behind Out-Law.com, showed that HMRC collected £137.2 million in additional tax as a result of investigations by its 'affluent unit' last year; up from £85.7m in 2012/13. Tax expert James Bullock of Pinsent Masons said that the figures showed that HMRC was no longer focussing its compliance efforts "solely on the super-rich".

"People who would just consider themselves moderately successful professionals and businesspeople are now also coming under the scrutiny of HMRC's specialist units," he said. "This unrelenting attitude is being backed up by new civil powers to pursue unpaid tax and a much more aggressive approach to prosecutions – targeted at professionals and entrepreneurs."

"Whilst the fact that more is being raised from compliance investigations should as a general principle be welcomed, HMRC needs to be vigilant that over-zealous use of some of its new powers does not end up being damaging to business. The diluting of the direct recovery of debt proposals in late November, and the apparent disappearance of the proposed strict liability offence of offshore tax evasion, are hopeful signs that HMRC is getting the message on this front," he said.

The figures relate to investigations carried out by HMRC's 'affluent unit' into the tax affairs of approximately 500,000 UK residents with either annual income of over £150,000 or wealth over £1m. It was set up in 2011 to target the group of taxpayers whose income means that they are not considered wealthy enough to be scrutinised by its 'high net worth' unit. In 2013, the affluent unit was doubled in size with the recruitment of an additional 100 inspectors. The private wealth threshold was also decreased to £1m from £2.5m, bringing more taxpayers into its remit.

HMRC has also run a number of voluntary disclosure campaigns targeting specific groups of professionals over the past few years. It is currently encouraging legal professionals to voluntarily declare any undisclosed income before a June 2015 deadline. HMRC's new 'Connect' database system gathers real-time data from public and private sources including banks, local councils and social media to help it identify groups where tax avoidance may be an issue.

New powers that would give HMRC the ability to withdraw outstanding tax directly from the bank accounts of debtors, as announced in the 2014 Budget, are due to come into force this year. In November, the government announced that it would require HMRC to conduct face-to-face meetings with those with tax in dispute before it could use the new powers, following critical responses to a consultation on the proposals.

The government also consulted last year on the introduction of a new 'strict liability' offence, carrying automatic criminal penalties, for those who failed to declare offshore taxable income. The new offence would have allowed HMRC to prosecute taxpayers that did not correctly declare income or gains, regardless of whether this was done with any intention to defraud. It has not yet responded to its consultation despite having already legislated for other proposals announced at the same time, indicating that the plans may have been quietly shelved.