Duff & Phelps provided valuation and related advisory services to the Board of OHA Holdings LImited in its recent ownership consolidation of Irving Oil, Limited
They “are coming to get you and you will pay your fair share”
Danny Alexander (Lib Dem conference, 15 September 2012)
With the UK economy shrinking for three quarters in a row, the government is desperately trying to raise money to fuel growth. A possible source in this situation are the wealthy, not only because the UK has the fourth largest number of high net worth individuals after the US, Japan and Germany, but because it can be viewed as a politically popular measure.
In 2009, HM Revenue and Customs (HMRC) established the High Net Worth Unit (HNWU) to deal with the personal tax affairs of the UK’s wealthiest individuals, stating that it was committed to building an ongoing and mutually beneficial relationship with wealthy individuals and their agents. Individuals who fall under the HNWU’s radar have net assets of £20 million or above.
Since the HNWU began its operations, it has collected an additional £500 million in taxes, exceeding expectations. When the unit was set up, HMRC expected it to bring in about £100 million a year but in 2011/12 it was reported that the tax yield from the intervention work hit £200 million, up from £162 million in 2010/11 and £83 million in 2009/10. It was announced that this year the HNWU has brought in £55 million to date. By comparison, the unit dealing with the Liechtenstein Disclosure Facility (LDF) that was also set up in 2009, raised just £54 million from 37 individuals who settled their affairs and received reduced penalties for declaring secret offshore accounts. This year, the unit dealing with the LDF announced that it will double in size and expects to bring in £3 billion for the period to 5 April 2016.
Following on from the success of the HNWU, the Affluent Unit (AU) was established in October 2011 to focus on individuals whose wealth was considered to be at least £2.5 million. Chief Secretary to the Treasury, Danny Alexander, announced at the end of September 2012 that the AU would be expanded to deal with taxpayers with a net worth of £1 million. As a result, the number of potential wealthy customers falling within the AU’s remit is expected to increase from 200,000 to 500,000. To facilitate this, HMRC will be adding 100 additional specialist inspectors to its original 200. By way of comparison, the HNWU has 400 specialists.
With the expansion of the AU, coupled with recent media attention and the momentum building around the forthcoming general anti abuse rules, it is expected that the number of investigations into the tax affairs of high earners will increase significantly. Wealthy individuals, particularly those within the investment management industry that may fall within the wider remit of the AU, should take note as the reach and resources of HMRC expand.
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