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HMRC tax avoidance crackdown increases payments by 60%

A report produced by law firm Pinsent Masons has revealed that a crackdown on tax avoidance from the “mass affluent” has seen the HMRC net an increase in tax payments of 60% from that demographic over the last 12 months.

The data that formed the basis of the report was released by HMRC, and highlights the significant increase in tax payments from those considered to be mass affluent; meaning they earn more than £150,000 per annum or have a wealth of more than £1m.

In total, £137.2m was raised in 2014, up from £85.7m in 2013.

HMRC’s Affluent Unit, which was set up in 2011 and is tasked with monitoring tax payments from mass affluent UK residents, doubled in size in 2013 as an additional 100 tax inspectors were brought on board to deal with demand.

However, despite this increased commitment to resources from HMRC, critics of the Affluent Unit which works alongside HMRC’s High Net Worth team, say that they could be doing a lot more to target some of the circa 500,000 UK residents who fall into the mass affluent category and are still avoiding tax.

One of the critics, Richard Murphy of Tax Research, said: “HMRC is supposed to collect £167bn of income tax this year, of which at least a quarter will be from the top 1% of income earners.

“In that case, to collect just £127m as a result of investigations into this group when the official tax gap is £35bn suggests that much less attention is given to them than any other group. The investigation success rate is way below anything that could be expected given that we know tax avoidance is mainly undertaken by the wealthy”.

However the Affluent Unit has received support from the Treasury, which has said that the surge in income from investigations into the mass affluent shows that the unit is a “success”.

Treasury minister David Gauke, said: “The public expect people to pay the right amount of tax under the law to help fund our services. HMRC are winning a lot of their court cases, and we are seeing a lot of people are preparing to pay up rather than to litigate for years”.

James Bullock of Pinsent Masons who compiled the report, said: “This surge in extra revenue from Affluent Unit tax investigations serves as a reminder that HMRC is widening its lines of inquiry.

“People who would just consider themselves moderately successful professionals and business people are now also coming under the scrutiny of HMRC’s specialist units”.

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