What does HMRC stand to gain from targeting the super-rich tax avoidance schemes?
It has been reported that HMRC intends to crack down on income tax avoidance by wealthy families and have created a secret unit to investigate how investment companies are used to minimise tax bills. After a Freedom of Information request, HMRC revealed it set the team up in April 2019, with the remit of investigating the use of family investment companies (FICs), amidst concerns over how the rich exploit loopholes to reduce tax bills.
But tax is a volume game. Given the unit will focus on FICs with assets above $1tn, the tax take for the treasury will be relatively marginal. The UK tax take is dependent on 10s of millions of individuals and businesses paying their tax bills in a timely manner. That is, quite literally, where the money is.
So HMRC is sending a strong message. All tax avoidance will be chased down.
Tax collection is a perennial problem for all states and always has been, but it is the mark of a successful state which discourages the majority from investing time and resources into finding ways to avoid paying taxes. It may be galling to some and a sense of political joy to others, but at the heart, it is economic signalling that is good for the UK.
