Among the measures announced in the chancellor’s Autumn Statement was a commitment of £79m over the next five years to enable HMRC to ‘allocate additional staff to tackle more cases of serious tax fraud and address tax compliance risks among wealthy taxpayers’.
As the Autumn Statement 2022 publication notes (at para 5.42), the return on this investment is expected to be significant, forecast to bring in £725m of additional tax revenue over that period.
Andrew Sackey, partner and head of tax fraud investigations at law firm Pinsent Masons pointed out that some of this extra funding seems like to be destined for HMRC’s Offshore, Corporate and Wealthy Directorate. ‘Interestingly, it is also the unit that is primarily responsible for policing the corporate anti-facilitation of tax evasion offence, and it may well be that this resource injection will reinvigorate HMRC’s enforcement of that 2017 offence,’ he said.
Pinsent Masons recently published research showing that, for every £1 spent on tax investigations into large business, HMRC could expect a return of £56 in additional tax. The findings also revealed a £28 return for every £1 spent on investigations into wealthy individuals.
Abigail McGregor, legal director at the firm, said: ‘As long as investigations keep bringing in far more than they cost, we can expect to see HMRC continuing to get more and more resources for its compliance work.
‘HMRC recognises that its ability to recoup the targeted tax revenue depends on its capacity to recruit effectively and on a timely basis; however, taxpayers should keep in mind that this continuing increased investment to close the tax gap means more investigations, which can lead to more penalties and more prison sentences in the most extreme cases.’
The firm had previously found that HMRC’s Large Business Directorate, with a staff wage bill of £125m, had brought in £8.6bn in tax: a 6,800% return on investment.
Pinsent Masons also highlighted the share-for-share exchange CGT proposal in the Autumn Statement, which is expected to bring in some £830m in extra tax by 2027/28 (see item 37 in table 5.1 of Autumn Statement 2022). The measure will deem securities in a non-UK company acquired in exchange for securities in a UK company to be located in the UK for CGT purposes, effectively removing remittance basis treatment. The non-UK company will be treated as if it were a UK company and gains will be brought within the scope of CGT. It should be noted that the proposals apply only where the companies involved are ‘close’ (or would be if both were UK companies) and the individual holds at least 5% of the securities in the UK company before exchange and in the non-UK company after exchange.
Writing in Tax Journal, Helen Buchanan, partner at Freshfields Bruckhaus Deringer, thought expected exchequer impact of the share-for-share proposal to be ‘surprisingly large’.
‘Is there a concern that the capital gains tax-based motive test already contained within the share-for-share exchange rules is too narrow, or simply too difficult to apply?,’ she wondered.
Among the measures announced in the chancellor’s Autumn Statement was a commitment of £79m over the next five years to enable HMRC to ‘allocate additional staff to tackle more cases of serious tax fraud and address tax compliance risks among wealthy taxpayers’.
As the Autumn Statement 2022 publication notes (at para 5.42), the return on this investment is expected to be significant, forecast to bring in £725m of additional tax revenue over that period.
Andrew Sackey, partner and head of tax fraud investigations at law firm Pinsent Masons pointed out that some of this extra funding seems like to be destined for HMRC’s Offshore, Corporate and Wealthy Directorate. ‘Interestingly, it is also the unit that is primarily responsible for policing the corporate anti-facilitation of tax evasion offence, and it may well be that this resource injection will reinvigorate HMRC’s enforcement of that 2017 offence,’ he said.
Pinsent Masons recently published research showing that, for every £1 spent on tax investigations into large business, HMRC could expect a return of £56 in additional tax. The findings also revealed a £28 return for every £1 spent on investigations into wealthy individuals.
Abigail McGregor, legal director at the firm, said: ‘As long as investigations keep bringing in far more than they cost, we can expect to see HMRC continuing to get more and more resources for its compliance work.
‘HMRC recognises that its ability to recoup the targeted tax revenue depends on its capacity to recruit effectively and on a timely basis; however, taxpayers should keep in mind that this continuing increased investment to close the tax gap means more investigations, which can lead to more penalties and more prison sentences in the most extreme cases.’
The firm had previously found that HMRC’s Large Business Directorate, with a staff wage bill of £125m, had brought in £8.6bn in tax: a 6,800% return on investment.
Pinsent Masons also highlighted the share-for-share exchange CGT proposal in the Autumn Statement, which is expected to bring in some £830m in extra tax by 2027/28 (see item 37 in table 5.1 of Autumn Statement 2022). The measure will deem securities in a non-UK company acquired in exchange for securities in a UK company to be located in the UK for CGT purposes, effectively removing remittance basis treatment. The non-UK company will be treated as if it were a UK company and gains will be brought within the scope of CGT. It should be noted that the proposals apply only where the companies involved are ‘close’ (or would be if both were UK companies) and the individual holds at least 5% of the securities in the UK company before exchange and in the non-UK company after exchange.
Writing in Tax Journal, Helen Buchanan, partner at Freshfields Bruckhaus Deringer, thought expected exchequer impact of the share-for-share proposal to be ‘surprisingly large’.
‘Is there a concern that the capital gains tax-based motive test already contained within the share-for-share exchange rules is too narrow, or simply too difficult to apply?,’ she wondered.
