HMRC doesn't know how many billionaires pay tax in UK, say MPs

Telegraph

3 days ago

HM Revenue and Customs (HMRC) does not know how many billionaires pay tax in the UK, a report by MPs has found.
The Public Accounts Committee (PAC), which scrutinises government spending, said an unknown but likely sizeable amount of wealth was being hidden from the tax office through legal loopholes and offshore bank accounts – despite a recent crackdown by officials.
When asked by MPs, HMRC was unable to provide a figure for how much revenue it collects from British billionaires, or how many billionaires paid tax in the UK.
The report's findings suggest it could be difficult for Labour to impose wealth taxes on the very richest in society.
Lloyd Hatton, a Labour MP and member of the PAC, told The Telegraph that closing the so-called 'tax gap' – the difference between the amount of tax that should be paid and the amount actually paid – would offer an alternative to introducing new wealth taxes.
Mr Hatton said: 'Rather than the Treasury trying to drum up new taxes, if we just got this right and closed the tax gaps there would be more money to spend on public services.'
The report said HMRC's estimate that it failed to collect £300m last year from offshore accounts was too low, given UK residents held £849bn in tax havens in 2019.
Mr Hatton described the estimate as 'completely inconclusive and in no way reflective of what the offshore tax gap is'. He believes the true figure is far higher.
He said: 'HMRC is unable to tell us how much tax the very wealthiest in the country – billionaires – are paying the UK. I find it really troubling that HMRC does not conduct that analysis.
'If we don't have that information it's really hard to close the wealthy tax gap and make sure we are collecting the right amount of tax and those with the broadest shoulders are paying their fare share.'
Effectively taxing the rich could raise 'billions of pounds of tax', Mr Hatton said.
He added that the PAC report did not look at the 'merits of any individual wealth tax policy or indeed how HMRC would implement a wealth tax'.
'What we're looking at is how we collect the right amount of tax from wealthy individuals living in the UK,' he said.
The population of wealthy taxpayers – who have at least £2m in assets or an income of £200,000 a year – has risen from 700,000 between 2019 and 2020 to 850,000 last year.
HMRC told the PAC it did not hold more detailed figures that would reveal the number of people in this category with the largest incomes and assets, including billionaires.
The report comes after Labour refused to rule out wealth taxes to fund a series of about-turns on planned cuts to public spending that could result in higher taxes in the Budget later this year.
The latest decision to reverse reductions in benefits payments will cost £3bn, according to a forecast by the Institute for Fiscal Studies think tank. Allowing pensioners with an annual income of less than £35,000 to keep the winter fuel payment is predicted to come with a price tag of more than £1bn.
One suggestion by Lord Kinnock, the former Labour leader, is a 2pc tax on assets worth more than £10m that could help raise about £10bn a year for the Treasury. He said the party was 'willing to explore' the measure.
But HMRC is already struggling to collect enough taxes from those who would fall into this category, according to the PAC report.
It said the tax office found it 'particularly difficult' to measure the unpaid taxes of the wealthiest and those with money hidden in offshore accounts.
The UK is also poised to lose more millionaires than any other country this year amid high taxes, making the pool of potential wealthy taxpayers smaller.
Figures from advisory firm Henley & Partners predicted last month that a net 16,500 millionaires would quit Britain in 2025, up from 10,800 last year. It would be the largest wealth exodus of its kind in any country for a decade.
MPs praised a recent crackdown on uncollected taxes that saw the tax office net £5.2bn from wealthy individuals last year, up from £2.2bn between 2019 and 2020, but said it suggested tax avoidance was growing.
The PAC report said: 'The scale of this success suggests either non-compliance amongst the wealthy has got worse, or that previous estimates of the extent to which they were avoiding tax were too low.'
HMRC aims to increase revenues from offshore taxes by at least £500m by the end of the decade and plans to hire 400 additional staff specifically to target the increasing number of wealthy taxpayers.
The PAC asked HMRC to provide a plan for how it intends to better its understanding of the wealth held by billionaires in the UK. It suggested officials target those named on the Sunday Times Rich List, a yearly publication of the wealthiest people in the country.
The committee recommended HMRC do this by following the example of the Inland Revenue Service, its American equivalent, by linking tax data to the Forbes 400, which lists the richest people in the United States.
An HMRC spokesman said: 'The Government is determined to make sure everyone pays the tax they owe. Extra resources were announced in the recent spending review which allows us to significantly step up our work on closing the tax gap amongst the wealthiest.
'This includes recruiting an extra 400 officials specialising in the wealthy and offshore tax gap, and increasing prosecutions of those who evade tax.'