Tax-Dodging Billionaires Are Being Let off the Hook by HMRC, Warn MPs

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MPs today criticised UK tax authorities for failing to chase billionaires to ensure they pay their taxes, and not even knowing how many are failing to do so.

The report from the Public Accounts Committee comes as pressure mounts on the Government to introduce a wealth tax, and as Chancellor Rachel Reeves desperately tries to find new revenues to bridge the gap in public finances.

Despite creating 100 datasets to tackle people with high spending life styles who are not paying all their taxes, HMRC’s one missing data set is the one that keeps records on billionaires.

HMRC defines the wealthy as anybody earning over £200,000 a year and with assets totalling over £2 million. But billionaires have huge wealth and can be worth 500 times more than those classified as wealthy by the tax authorities.

Lloyd Hatton MP, Member of the Public Accounts Committee, said:  “We already know a great deal about billionaires living in the UK, with much information about their tax affairs and wealth in the public domain.

“So we were disappointed to find that HMRC, of all organisations, was unable to provide any insight into their tax affairs from its own data – particularly given that any single one of these individuals’ contributions could make a significant difference to the overall picture.

Hatton continued: “Our report shows that, however you slice it, there is a lot of money being left on the table. HMRC must, under its new leadership, begin collecting the correct amount of tax from the very wealthiest – and this must include wealth that is currently squirrelled away in tax havens. There is certainly room for improvement. We hope that HMRC uses both our recommendations and the new funding it has secured in this area to do so.”

The report states that the number of wealthy people in the UK jumped from 700,000 to 850,000 in the last five years – but it has lumped together those earning £200,000 annually with the super wealthy.

It has raised more money from the wealthy – rising from £2.2 billion to £5.2 billion in the last five years but there has been a big drop in prosecutions and penalties applied to the very wealthy.

In 2022-23, there were 1747 penalties applied to the wealthy but this dropped to 456 last year. The number of people prosecuted by HMRC dropped to 25 last year.

The report states: “It is particularly disappointing that HMRC has issued no penalties to enablers of tax evasion, despite acknowledging unscrupulous advisers often play a key role in helping the wealthy evade tax. We are also unconvinced that HMRC fully utilises the deterrent effect of publicising successful prosecutions, despite it acknowledging the value of publicising high value, high-profile cases.”

Nor does it rely on all sources of public information on the wealthy. It follows disclosures in Forbes magazine but ignores The Sunday Times rich list.

The weakest area appears to be gathering information from money deposited in tax havens – which  totalled £849 billion five years ago and could now be higher. MPs say HMRC has been too complacent about how much they could raise from investigating this.

The report states: “Its partial estimate of the offshore tax gap, of £0.3 billion, seems far too low, particularly when compared with UK residents holding £849 billion in offshore accounts in 2019. Internally, HMRC has identified a much larger amount at risk from all forms of offshore non-compliance.”

A HMRC spokesperson said: “The Government is determined to make sure everyone pays the tax they owe. Extra resources were announced in the recent spending review which allows us to significantly step up our work on closing the tax gap amongst the wealthiest. This includes recruiting an extra 400 officials specialising in the wealthy and offshore tax gap, and increasing prosecutions of those who evade tax.”