Overview of how HMRC collects the right tax from wealthy individuals
Updated 7 December 2022
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1. Introduction
It’s the role of HMRC to make sure that both businesses and individuals pay the right amount of tax.
Wealthy individuals may present a higher risk of error than other customers as the amounts involved are greater also because they may have investments in more than one country, making their financial affairs more complex. To secure compliance from wealthy customers, HMRC has a specific team that applies a proactive and co-operative approach, taking into account the unique nature of this customer group’s tax affairs.
This means we offer support where needed, such as around life events, legislation changes or complex transactions, but take action against the minority who fail to file or incorrectly file tax returns. We use strong data-led approaches to identify when tax is at risk of not being paid. We also assign specific teams, including Customer Compliance Managers (CCMs), to develop an in-depth understanding of the finances, behaviours and compliance risks of wealthy individuals. The information below provides further detail on how HMRC collects the correct tax from ‘wealthy’ individuals.
2. What we mean by ‘wealthy individuals’
We define individuals as ‘wealthy’ if they have incomes of £200,000 or more, or assets equal to or above £2 million in any of the last 3 years. There are approximately 800,000 wealthy customers.
Wealthy customers are managed by the Wealthy Team within HMRC’s Customer Compliance Group.
3. How we collect the correct tax from wealthy individuals
Co-operative approach
It’s everyone’s responsibility to get their own tax right, but we can prevent non-compliance before it happens by educating and supporting wealthy customers while continuing to respond to the minority we identify as non-compliant. To help wealthy customers get it right first time, and to remove opportunities and incentives for error, we undertake activity before a tax return is submitted.
We base our activity on the known risks within the wealthy customer group and when appropriate deliver a common educational message to the individuals we believe will benefit most.
Digital prompts are also used to flag when a customer’s entry on the online Self Assessment system is out of line with what we expect to see.
Targeted guidance is also provided to wealthy individuals’ tax advisers on the correct approaches to complex tax issues, enabling them to ensure returns are correct before being submitted to HMRC.
We also consult with professional bodies who represent wealthy individuals at the Wealthy External Forum to build trust with tax advisers. Read more information on our Wealthy External Forum page.
Compliance checks
We respond to non-compliance by carrying out a compliance check. A compliance check makes sure wealthy individuals pay the right amount of tax at the right time and receive the right allowances and tax reliefs. The checks discourage tax evasion and tax avoidance and makes sure the tax system is operating fairly.
Risk-based model
A risk-based model utilises high quality intelligence to find wealthy customers with potential errors in tax returns. Compliance checks are then carried out by dedicated HMRC staff known as caseworkers.
Customer Compliance Managers
A CCM is assigned to customers with the highest levels of complexity or opportunity for non-compliance. CCMs develop an in-depth understanding of their finances and behaviour and then review tax returns alongside high quality intelligence which has been gathered from within and outside the UK. CCMs use the information they gather to challenge those who don’t appear to be paying the correct tax by carrying out a compliance check.
High-Risk Wealth Programme
The High-Risk Wealth Programme aims to accelerate the resolution of some of the most complex and highest risk cases within the wealthy customer group. HMRC brings cases into the programme that would benefit from a project management approach. Specialists from across HMRC are involved and, where needed, external legal counsel.
Read more information about the High-Risk Wealth Programme.
Fraud and avoidance
The Wealthy Team also works with colleagues across HMRC, including Fraud Investigation Service and Counter-Avoidance, handling marketed avoidance schemes and offshore disclosure.
Alternative Dispute Resolution
Alternative Dispute Resolution is a way of dealing with compliance disputes which ultimately result in a decision that could be appealed. It involves a HMRC officer trained in mediation skills and techniques who acts as a neutral third party without forming a view on who is right or wrong. As the mediator they’ll help the wealthy customer and the Wealthy Team caseworker resolve a dispute together.
Disputes between HMRC and our wealthy individuals are resolved in line with our litigation and settlement strategy.
4. Tax collected from wealthy individuals
Each year HMRC publishes its annual report and accounts. You can find out more about estimated tax receipts from wealthy individuals and estimated compliance yield generated from our activities in the HMRC annual report and accounts.
HMRC publishes an estimate of the tax gap across all taxes and duties administered. The tax gap is the difference between the amount of tax that should, in theory, be paid to HMRC, and what is actually paid. Read more about measuring tax gaps in the measuring tax gaps publication.