On 25 September 2012, HM Treasury announced the expansion of the team responsible for looking at the tax position of UK residents with a ‘net worth’ of more than £1m.
The ‘Affluent Unit’ was originally set up in October 2011 – as part of the ‘spend to save’ initiative – to identify UK residents with a ‘net worth’ of between £2m and £20m. HM Treasury has now confirmed that the Affluent Unit will grow from 200 to 300 specialists and will look at individuals with net worth of between £1m and £20m. This means that a further 250,000 people will appear on the Affluent Unit’s radar and face the increased risk of their affairs being risk reviewed or scrutinised by HMRC.
In this context, net worth means the value of a person’s assets after taking into consideration mortgages and other liabilities. Press reports that anyone with a property worth more than £1m will be targeted are therefore not entirely accurate.
The officers within the Affluent Unit specialise in ‘risk reviewing’ the affairs of UK residents by comparing UK tax returns to the information routinely obtained by HMRC using its information powers or through the exchange of information with other states. Once the information is received, HMRC utilises intelligent search software or ‘web robots’ to uncover information and anomalies that require further investigation
The announcement was followed by press speculation that UK residents with overseas properties were at risk. A common misconception is that HMRC are only interested in identifying whether the property is rented. This is merely one aspect that the Affluent Unit will be looking at going forward, and, in Gabelle’s view, any enquiries or checks made by HMRC will almost certainly be project based e.g. focusing on UK residents with overseas properties
UK residents that HMRC believe have a net worth of more than £20m should not be the focus of the Affluent Unit. Instead, these individuals are the responsibility of the ‘High Net Worth Unit’ (HNWU) which was set up to build relationships with the estimated 5,000 individuals worth more than £20m. A different approach is adopted to police their tax affairs, with HMRC allocating a client relationship manager to establish a better understanding of their interests and assets and the implications for their UK tax position.
Gabelle is experienced in advising professionals and their clients in relation to all aspects of an HMRC enquiry or investigation. We know how best to communicate with HMRC and can minimise the damage that an enquiry or investigation can cause, finding the right solution for the taxpayer.