Secret HMRC Unit Targets Wealthy Families

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A hush-hush tax probe is underway to stop wealthy investors avoiding inheritance tax with family investment companies.

HM revenue & Customs set up a special unit to investigate family offices a year ago.

The FICs are believed to manage more than £1 trillion in assets which are escaping IHT by exploiting legal loopholes.

The main concern is the companies are receiving dividends from stocks and shares.

As a company, the FIC pays corporation tax at 19% on this income rather than income tax at higher rates.

HMRC tight lipped over investigations

And if family members are shareholders, shares in the company rather than assets pass between them when a relative dies, reducing HMRC’s IHT tax take.

“The Family Investment Company team was established in April 2019 to look at FICs and do a quantitative and qualitative review into any tax risks associated with them with a focus on inheritance tax implications,” an HMRC spokesman admitted.

“The team’s work is exploratory at this stage and as such, we would not like to share any more details.”

HMRC argues releasing more details about the unit would allow family offices to divert assets and resources to avoid tax.

Family offices are private advisers who deal with a range of financial services for the wealthiest families and investors. They can also manage private schooling, travel and other aspects of a household.

More than 1,000 homes and businesses raided

Separately, HMRC has also revealed fraud investigators carried out 1,082 raids against homes and businesses last year.

HMRC investigators have the same powers as the police to seek a warrant from the courts and can even link with overseas police and tax authorities to carry out simultaneous raids in the UK and other countries.

“Anyone with undeclared UK tax liabilities, wherever country they currently reside in, should give very serious consideration to taking skilled professional advice as to how they can protect themselves from an unexpected knock on the door early one morning from HMRC,” said lawyer Andrew Sackey, a partner at solicitors Pinsent Mason, who uncovered the data in a freedom of information request.

Sackey also explained the Common Reporting Standard that allows tax authorities in different countries to exchange information is often the source of evidence needed to obtain a warrant.