HMRC reports 'dramatic' returns on investment into UK tax investigations

Tax take by the High Net Worth unit within HM Revenue and Customs (HMRC) increased to £414 million in extra revenue, or £29 per £1 spent on investigations, over tax year 2014/15; up from £268m, or £18 per £1 spent on investigations in the previous year, according to the figures. Investigations into large businesses recouped £73 per £1 spent over the same period; slightly down from the £97 per £1 invested over 2013/14.

Tax investigations expert Fiona Fernie of Pinsent Masons, the law firm behind Out-Law.com, said that HMRC was likely to want to "build on this success and ratchet up return on investment even further" over the coming year.

"The improvement in ROI [return on investment] is particularly marked for investigations into High Net Worth individuals," she said. "HMRC now has a whole host of tools at its disposal when it comes to identifying targets for investigation and collecting extra revenue from this group - including its sophisticated database system Connect."

"The Revenue – and Treasury – will want to focus on the most lucrative areas, so the expectation is that money will continue to be poured into this area to drive up its effectiveness and efficiency," she said.

HMRC's High Net Worth unit was set up in 2009 and employs 400 specialists to handle the tax affairs of the UK's 6,000 wealthiest individuals, each of whom has a net worth of £20 million or more. Taxpayers assigned to the High Net Worth unit are given a single point of contact, whose job it is to make it easier for that person to pay the correct amount of UK tax.

According to Fiona Fernie, "liberal" use by HMRC of its new powers to demand disputed tax upfront may have partly driven the unit's increased return on investment over the past financial year. Earlier this month, HMRC announced that it had collected more than £2 billion from individuals and businesses as a result of its ability to order payment of disputed tax before a case has been fully resolved through the use of accelerated payment notices (APNs).

Although the yield ratio from HMRC's investigations into large businesses "weakened slightly" over the last tax year, Fernie said that the £73 collected per £1 spent on these investigations "still represents a strong return". HMRC's Large Business Directorate was set up in April 2014 to replace the Large Business Service, which only dealt with the tax affairs of the UK's 800 largest and most complex businesses.

"The Large Business Directorate now covers an extra 1,300 companies," Fernie said. "New targets will include a number of slightly smaller companies - investigations into which will naturally yield slightly less, meaning that the Revenue is now squeezing out slightly less per £1 invested than before."

"With the tax affairs of the UK's largest companies increasingly the focus of public attention, the Revenue is likely to continue to focus efforts here. HMRC, as always, needs to ensure that it doesn't squeeze too hard: it needs to balance its drive towards clamping down on abuse and avoidance against the need to maintain an attractive, business-friendly environment for major corporates and high net worth investors," she said.