Are HMRC’s high net worth unit figures artificially inflated?

HMRC’s high net worth unit brought in £162 million in the last financial year, almost double the amount from the previous year, according to the Sunday Times.

The unit investigates the financial affairs of the 5,000 richest people in the UK, but an expert has now warned that the figures could have been inflated artificially.

David Gauke, the exchequer secretary to the Treasury, pointed out that very rich people have extremely complicated tax affairs but HMRC’s high net worth team works closely with accountants to make sure this complexity does not get in the way of accuracy.

Grant Thornton’s tax director, Mike Warburton, said the high net worth team had received extra resources but the tax take could be artificially bolstered by people trying to avoid the top rate of income tax, which is currently set at 50%.

He went on to explain a lot of people brought forward income to 2009-10 when the 50% announcement was made. This increased the tax yield but many of these people will not take any more dividends until the tax rate reduces.

This is not unlike the time the government announced that taper relief was to end. People brought forward capital gains in the 2008-09 financial year and income from CGT increased to £7.8 billion but then fell back to just £2.5 billion the following year.

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