Measures announced in the Autumn Statement by chancellor of the exchequer Jeremy Hunt are projected to bring in an extra £1.7bn ($2bn, €1.96bn) by 2027/28 via a crackdown on tax avoidance and evasion, said law firm Pinsent Masons.
HM Revenue & Customs (HMRC) will receive a further £79m over the next five years to “allocate additional staff to tackle more cases of serious tax fraud and address tax compliance risks among wealthy taxpayers”.
Research by Pinsent Masons showed that every £1 spent on investigations into the tax affairs of large businesses yields an additional £56 in tax, while investigations into wealthy individuals yield £28 for every £1 spent. The extra funding is forecast by the government to bring in £725m in additional tax.
Abigail McGregor, legal director at Pinsent Masons, said: “The Treasury knows that tax investigations are an open door it can continue to push. 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.”
Also, within the Autumn Statement, the Treasury moved to close a loophole that allowed non-domiciled individuals to fall outside of capital gains tax (CGT) when selling shares in non-UK businesses.
The move is expected to bring in an extra £830m in tax by 2027/28. Therefore, HMRC is set to net a total £1.7bn from its various crackdowns.
As part of the CGT measures, where a non UK holding company is placed on top of an existing UK company, non-doms selling shares in it will no longer be taxed on the remittance basis, which usually results in a lower tax bill.
Instead, the non-UK company will be treated as if it was a UK company and investor gains will be subject to CGT.
Peter Morley, partner at Pinsent Masons, said: “While the government has left non-dom status unchanged, it’s interesting to see it start to make changes that will bring in more tax from non-doms.
“While the loophole that HMRC is closing today won’t affect a huge number of people, the amount of tax it is expected to raise over the next few years is quite significant.”