£30 return on every £1 spent on HNWI tax investigations

£30 return on every £1 spent on HNWI tax investigations

Feb 26, 2024

HMRC is returning to pre-pandemic levels of tax recovery as a result of investigations into high net worth individuals and big business

In total, the tax authority recovered £39bn in the 2022-23 tax year as a result of work by investigators, up from £32.2bn in 2021-22. The yearly figure is now slightly up on the performance pre-Covid when £37.7bn was collected from tax avoiders.

For every £1 spent on investigations into high net worth individuals (HNWI) last year, HMRC recovered £30, up from £28 in 2021-22.

Steven Porter, partner at Pinsent Masons, said: ‘Investing in the staff and technology to chase wealthy individuals is paying handsomely for HMRC – high net worths should expect this trend to continue.

‘HMRC will continue allocating teams of investigators to where it gets the best returns.’

While HNWI is proving a lucrative source of revenue, HMRC’s large business team had the best return on investigations, recovering £58 per £1 spent, revealed analysis by law firm Pinsent Masons.

Not all compliance teams increased their yield with the individuals and small businesses team recovering just £12 per every £1 spent. In 2021/22 this was £16, marking a worrying 25% drop in performance. This is the segment of the population which accounts for the most tax avoidance.

The bill for tax compliance increased by 14% last year but yielded £7bn more than in 2022, and the increase in recovered unpaid tax will help HMRC to reduce the £36bn tax gap.

Porter said: ‘The Treasury has been increasing the resources for HMRC’s compliance drive – and that bet is paying off.

‘On this basis you would expect the government to continue to invest heavily in HMRC’s investigations, the only capacity constraint is the need to recruit and train the staff.’

The success of the current investigation activity will lead to more targeted campaigns, with ultra-high net worth individuals likely to be in HMRC’s sights.

Nikhil Oza, corporate tax partner at UHY Hacker Young, said: ‘HMRC could capitalise even more by targeting ultra-high net worth individuals suspected of underpaying tax and cryptocurrency traders who have not declared tax appropriately.

‘HMRC is getting tougher and cracking down on unpaid tax across the board – and these figures show it’s working.

‘Any business or individual with unpaid tax needs to be aware that their chances of getting away with it are lower than they’ve ever been. HMRC is deploying more technology, including AI to catch them and the government is happy to fund more investigations.’