Much of the pre-Budget noise in recent weeks has been about how to tax wealth and the wealthy. In the event, nothing much has changed in terms of tax policy. But snuck out alongside the Budget was a significant new piece of the administrative puzzle: HMRC’s ‘Wealthy Plan’, a roadmap for improving efforts to make wealthy taxpayers pay their due taxes. It’s been under development over the summer, after a coruscating Public Accounts Committee (PAC) report last year claimed HMRC didn’t have a grip on the scale of wealthy non-compliance.
Setting aside the big-picture politics of wealth and inequality in Britain, HMRC’s Wealthy Compliance Directorate is managing two sets of immediate pressures. First, there’s a rising ‘wealthy tax gap’. HMRC estimates that the total unpaid taxes of the 1.3 million taxpayers that HMRC classifies as ‘wealthy’ (income over £200,000, or assets over £2 million, in any of the last three years) now decisively exceeds that owed by all the other 39 million individual taxpayers combined.
On the other side, the wealth management industry and private client law firms are complaining that HMRC enquiries are too onerous, and risk prompting their clients to leave the country.
With these competing demands, how does the Plan stack up?
In this piece we look at three aspects where there are clear commitments: information and data, people and skills, and a recalibrated relationship between HMRC and the wealthiest taxpayers. All three are vital and welcome. In each area, we suggest some elements that may be needed for success.
More data, greater transparency
One of the plan’s most promising elements is its commitment to develop a more comprehensive picture of wealthy individuals’ financial affairs, including their connected companies, trusts, partnerships and offshore interests.
HMRC’s limited visibility of very wealthy taxpayers was something the PAC heavily criticised. It shouldn’t be underestimated. Tax affairs at the top end of the wealth spectrum can be as complex of those of a multinational company. Income and assets are held across multiple entities and jurisdictions. International tax questions are by far the biggest area of wealthy tax compliance disputes, making up over a quarter of the £16.8bn tax under consideration in disputes with wealthy individuals and mid-sized businesses.
Yet individuals’ tax returns gather very little information about taxpayers’ assets and entities. It’s left almost entirely to individuals and their advisers to determine what parts of their income and gains are within the scope of UK tax, and to calculate how much of those income and gains must be declared and taxed. Disagreement over these questions is often precisely the basis for wealthy tax disputes in the first place.
The Wealthy Plan promises to “bring together data from across HMRC systems and third parties to provide a more in-depth and holistic view of wealthy customers and their connected interests.”
That effort already seems to have started. The plan confirms that through its own and third-party data, HMRC has identified more than 200 billionaires with a UK tax footprint, and allocated a Customer Compliance Manager to each. Compliance Managers dealing with these very wealthiest taxpayers have also reportedly started to solicit introductory meetings that include requests for fuller lists and descriptions of the taxpayer’s asset footprints: including onshore and offshore properties, corporates, trusts, partnerships, charities, REITs and unincorporated businesses (a copy of the full checklist sent to one HNWI has been circulating online).
So far, such requests are entirely voluntary – though that hasn’t stopped them eliciting howls of rage from billionaires and their advisers, one of whom a Sunday newspaper quoted last week as saying “Who do these people think they are, the Stasi?”
(Such outrage may be fairly incomprehensible to ordinary taxpayers – who don’t have an individual compliance manager, are never invited in for a chat, face much less polite letters and demands for information and payment before HMRC will discuss compliance inquiries with them, and last year collectively spent 696 years waiting on the phone to speak to someone at HMRC).
HMRC seeking more information about the wealthiest taxpayers’ global assets and structures is a very positive development. But as the wealth industry’s resistance indicates, there remains a big difference between HMRC assembling information from different (and partly voluntary) sources; and a standardised obligation on the wealthiest to disclose their financial affairs.
To end ‘cat and mouse’ games, TaxWatch has previously proposed that the very wealthiest UK taxpayers should be required to provide HMRC – on a strictly confidential basis – with a standard map of their worldwide income, assets, bank accounts, trusts, companies and property, wherever they are located and regardless of whether they consider them to be inside the UK tax net or not. An analogy could be made to the country-by-country reporting requirements that apply to multinational businesses, though with very different data points.
Such a formal disclosure framework could also be linked to advance clearances, exchanging transparency for greater taxpayer certainty. But as with CBCR for multinationals, it could require a statutory footing, and possibly international coordination.
A related and welcome commitment is leveraging automated triggers and analytics to process these data – part of much larger data technology efforts across HMRC. It’s crucial that such internal systems are built as sustainable, long-term assets. There will be an inevitable temptation to buy them in as an externally-provided service, especially since money for capital spending is scarce. (HMRC received real term capital budget cuts of over 24% in the last Spending review, by far the deepest capital spending cuts of any government department). Though it may ease short-term budget pressures, the long-term costs of being locked into providers should warn against such an approach. Equally, there are cautionary tales in past IT contracting failures, such as the quiet shelving (revealed by TaxWatch in January) of the flagship post-Brexit ‘Single Trade Window’ after HMRC had paid over £100 million to a Big Four consultancy firm that didn’t deliver a workable system.
People and skills
The super-rich are a rarified and varied cohort. Someone who has inherited a big landed estate will have very different kinds of assets and income streams to a start-up founder, or a globally-mobile oligarch. TaxWatch is pleased that HMRC’s plan envisages tailoring its compliance efforts to different kinds of wealth and wealthy through ‘segmentation’ – something that TaxWatch has also been advocating.
It’s equally important that those in compliance teams responsible for different kinds of ultra-wealthy taxpayers have deep knowledge and experience of their cohort’s transactions, assets and risks. This week’s Wealthy Plan recommits HMRC to its Spring Statement 2025 target to recruit or redeploy 400 more staff by 2030 to focus on wealthy offshore non-compliance. It reveals that 244 are already in place. In July, HMRC reported that 200 of these were redeployees from elsewhere in the organisation, and as with previous HMRC staffing announcements it will be crucial to understand the impact elsewhere of them being redeployed, along with a realistic sense of how long it takes to train new hires.
To get around the latter issue, HMRC is also seeking to draft in external ‘wealth management’ specialists. HMRC says it has now recruited “over 20 external experts from outside the organisation”, though their level and experience isn’t disclosed. Similar efforts in the past have foundered over the vast remuneration discrepancies between the wealth management industry and the civil service.
As with new data systems, so fostering internal investigative talent, and giving staff space and incentive to develop specialisms, may be a better bet in the long run.
Cooperation… but also consequences?
The plan places considerable emphasis on improving the experience of wealthy taxpayers. HMRC wants to make its dealings with big fish more responsive, provide greater certainty, and reduce unnecessary contact with those who present a lower compliance risk.
But – and this is a big caveat – a better relationship with compliant taxpayers shouldn’t come at the expense of effective action against deliberate or recalcitrant defaulters and evaders. We previously highlighted a decline in the proportion of wealthy compliance cases resulting in penalties: just 5 percent of wealthy compliance cases ended with a penalty in 2023-24, compared with 14 percent in 2018-19. New figures in the Wealthy Plan suggest penalties are on the rise again (from 456 in 2023-24 to 803 to 2025-26), and it will be interesting to see if this trend continues.
There are still few consequences for those who enable wealthy and offshore non-compliance. No enabler of offshore tax evasion – by definition likely to involve wealthy taxpayers – has yet been penalised since such penalties were introduced in 2016. From 2021-22 to 2023-4 there were fewer than five penalties for enablers of defeated avoidance schemes, and though 2024-25 saw 180 such penalties they averaged just £9055 each.
The Wealthy Plan introduces more accountability for penalties, with a mandatory referral process for complex penalty cases and additional training. On the criminal side, it commits to increasing annual charging decisions for the most harmful fraud by 20 percent by 2029-30, relative to 2023-24 levels.
Will it deliver?
The Plan envisages better data, specialist skills, tailored compliance interventions, greater taxpayer transparency and (potentially) a stiffer posture towards penalties. Taken together, these measures could help bring down the £3.6bn wealthy tax gap and boost wealthy compliance yield, which has been fairly static in recent years when adjusted for inflation (see below), in contrast to the other part of the Wealthy Compliance Directorate’s responsibilities (mid-sized businesses). The Wealthy Plan projects that it will bring in at least £500 million of additional revenues by 2029-30, though that figure is not included in the OBR-validated projections from this week’s Budget.
Publishing a plan is only the beginning. The government and HMRC must now show that the commitments are being delivered, and are making a measurable difference.
To gauge success, we also need to know how big the problem is: especially for less visible evasion on offshore income and gains. This week’s Budget promised yet again to publish the ‘offshore tax gap’: HMRC’s estimate for the amount of tax being lost through undeclared overseas assets, offshore trusts, foreign financial accounts and tax haven companies. It’s positive that the government is no longer denying that offshore tax gap figures exist, as it did to MPs last year. But ministers have promised to publish these figures since 2022. We hope finally to see them in 2027.
This week’s ‘breathing space budget’ was, by its own definition, modest. While trade-offs are the stuff of politics, administering the existing tax code by demonstrating that HMRC is ensuring the very wealthy are paying their due taxes will be key.
Main photo by Brett Jordan on Unsplash
