Do benefit fraud investigators outnumber super-rich tax inspectors 8:1?
9 July 2018
What was claimed
HMRC employs just 522 staff to tackle tens of billions of tax evasion by the super-rich.
It employed around 500 staff in March 2017 to work with taxpayers with assets over £10m, and another 500 staff to investigate the tax affairs of taxpayers with assets over £1 million, or an income over £150,000 a year. In 2016, they were estimated to account for around £2bn in lost tax revenue.
What was claimed
DWP employs 4,045 to tackle benefit fraud.
It employs around 4,000 full-time equivalent staff to deal with benefit fraud, as of October 2017. Of these, 1,900 are directly involved in investigations. An estimated £2 billion in benefits were fraudulently claimed in 2017/18, according to the government.
The SNP and a widely shared post on Twitter compare the number of staff working at HM Revenue and Customs (HMRC) tackling tax evasion and the number working at the Department of Work and Pensions on benefit fraud. We’ve looked at similar claims in the past.
As of March 2017, HMRC employed around 500 staff to work with “high net worth” individuals, with assets over £10m, on their tax affairs. It employed another 500 or so staff to investigate the tax affairs “affluent” taxpayers with an income over £150,000 a year, or assets over £1 million.
In 2016, The National Audit Office (NAO) estimated that there are around 550,000 affluent and super-rich taxpayers, and within that group they estimated there to be around £2 billion in lost tax revenue, primarily due to tax avoidance and the disputes over how tax law is interpreted. The NAO told us it referred to the amount of tax at risk from wealthy taxpayers at that time, and is not based on a single tax year. Tax avoidance is the exploitation of tax rules to gain an advantage which wasn’t intended by Parliament. “It involves operating within the letter – but not the spirit – of the law”, according to the National Audit Office.
As of October 2017, the Department for Work and Pensions (DWP) employed around 4,000 staff to deal with benefit fraud, with around 1,900 of these directly involved in investigations. An estimated £2 billion in benefits were fraudulently claimed in 2017/18.
These two sets of staff do different jobs in different government departments, so comparing the number of staff in each team won’t give us the full picture of their roles.
HMRC and the “super-rich”
HMRC employed roughly 522 full-time equivalent staff in its “high-net worth unit” as of 31 March 2017. That’s the number of full-time staff there would be if everyone’s hours were added together.
The high net worth unit deals with individuals defined as having assets (minus any debts) of over £10 million—though until 2016/17 it was those with a net worth of £20 million. HMRC assigns each high net worth individual a “customer relationship manager” to deal with their tax affairs.
These managers are meant to develop an understanding of the taxpayer’s affairs and behaviours and “resolve issues before they submit their tax return”. Not all of the 522 staff will be managers, they also have a team of staff that works with them—in 2015/16 there were 40 managers out of around 400 staff (equating to about 160 high-net worth taxpayers for every manager).
There are around 550,000 “affluent” or “super-rich” taxpayers
HMRC employs about 518 more staff to investigate “affluent” taxpayers—that’s people with an annual income of at least £150,000 a year, or wealth of £1 million or more. The affluent unit is tasked with investigating where wealthy individuals are avoiding or evading taxes.
In 2016, the National Audit Office reported that there were around 550,000 affluent or high-net worth taxpayers, and that they could account for around £2 billion in lost tax revenue, primarily due to tax avoidance and the disputes over how tax law is interpreted.
Tax avoidance is the exploitation of tax rules to gain an advantage which wasn’t intended by Parliament, but which is legal. Tax evasion is an illegal activity where people conceal or misrepresent information in order to reduce the tax they pay.
HMRC estimates that £1.7 billion in tax revenue was lost through avoidance in 2016/17, £5.3 billion was lost through differences in legal interpretation, and another £5.3 billion was through evasion.
DWP and benefit fraud
As of October 2017, DWP employs around 4,045 full-time equivalent staff to deal with benefit fraud. Of these, 1,928 full-time equivalent staff are directly involved in investigations.
An estimated £2 billion in benefits were fraudulently claimed in 2017/18, according to the government. That’s the equivalent of 1.2% of total benefit expenditure. You can read more about types of benefit fraud here.
We’ve asked DWP for more information about the cases which their benefit fraud team deals with. When we last looked into a similar claim two years ago, HMRC told us its dedicated units were important parts of its work in stopping tax evasion and avoidance, but far from the sum total.
Update 10 July 2018
We updated the piece with additional information we received from the NAO, on what time period the £2 billion in lost tax revenue from affluent and high-net worth taxpayers related to.
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