PAC hearing: Collecting the right tax from wealthy individuals

The committee heard that:

• HMRC received funding in the spending review to enable it to roll out a new telephony platform
• HMRC do not hold a list of UK billionaires and have no intention of doing so
• HMRC is not being outgunned by advisers but nevertheless is bringing in additional wealth management expertise
• HMRC estimates for the ‘wealthy tax gap’ and ‘offshore tax gap’ are robust

NB. The session took place prior to the release of new tax gap statistics on 19 June 2025.

At the beginning of the session, the committee chair, Sir Geoffrey Clifton-Brown, expressed concern about the recent phishing attack on HMRC, which resulted in a £49 million loss for the tax authority, and encouraged HMRC to inform him of such matters promptly in future. John-Paul Marks, HMRC's Chief Executive, expressed his commitment to transparency and open disclosure, offering his regret for any frustration in terms of how HMRC had handled this issue.

Customer services 

Before turning to the main business of the session Nesil Caliskan (Lab) asked a series of questions following up the committee’s January 2025 report on HMRC customer service. She began by challenging HMRC on data showing only just over 66% of customers spoke to a helpline adviser, against a target of 85%, and asking why HMRC is still not willing to commit to an average waiting time target for customers’ phone calls. Responding, John-Paul Marks and Angela MacDonald, HMRC’s Deputy Chief Executive, said that in March 2025 the figure was 80.2%, in April 83.6% and in May 84.6%. The target of 85% of calls answered corresponds to around 10 minutes average speed of answer, Marks added. The average waiting time in the year 2024-25 was 18 minutes, 38 seconds, said MacDonald. In April 2025, it was 13 minutes, 31 seconds and in May, 12 minutes, 45 seconds.

Questioned further by Caliskan, MacDonald told the committee that, a few weeks ago, HMRC began the procurement of a complete replacement for their telephony platform, “demonstrating a multi-million-pound commitment to telephony being a key part of our channel mix”. “It will give us the technology to remove completely the 70-minute cut-off, which is part of a system limitation that we have at the moment… It will also enable us, in real time, to tell customers where they are in the queue and how long they are waiting.” She added that HMRC was “very pleased” to receive funding in the previous day’s spending review to allow them to procure that platform and roll it out during the spending review period, first to compliance, then to the remainder of their services, including customer services.

Tax affairs of the super-wealthy 

Early on in the session, Lloyd Hatton (Lab) pressed the HMRC officials over what data they hold on tax paid in the UK by billionaires. Philippa Madelin, HMRC’s director for wealthy and mid-sized business compliance, replied that HMRC do not hold a list of billionaires. They do hold data on the top income tax and capital gains tax payers and publish statistics on this, but there is no requirement in UK tax law to report your total wealth, so HMRC do not have that data. “We have only the data that is needed to administer the tax system,” added Jonathan Athow.

Sir Geoffrey Clifton-Brown noted that the number of UK billionaires in the Sunday Times Rich List 2025 was now 156 (down from 165 the year before). He encouraged HMRC to look at that and pay greater attention to tax collection from billionaires. One large tax case from 2022 to 2024 yielded over £2.5 billion, he observed. HMRC said they did not recognise this amount coming from a single case. Hatton asked whether HMRC has ever tried to link the Rich List with their own tax records. Athow would not be drawn on use of specific data.

Hatton encouraged HMRC to increase transparency by publishing how much tax the wealthiest pay, suggesting that it would boost public confidence in HMRC. In response, Athow said that the problem is that HMRC’s information on wealth is incomplete and not up-to-date.  John-Paul Marks acknowledged the case for greater transparency and said that HMRC are committed to looking into the NAO’s recommendation to review population definitions and improve data sharing. He added that he is committed to exploring ways to ‘improve trust in the UK tax system’, including better use of data and research, while affirming HMRC’s focus on investigating high-risk wealthy individuals to maximise tax recovery.

Rachel Gilmour (Lib Dem) asked if HMRC see different risks from the very, very wealthy as opposed to just the wealthy. Madelin replied that it wasn’t necessarily about wealth bands. “For example, you could have a very wealthy person who is paid a lot through pay-as-you-earn who may not have any offshore investments. Therefore all their income is very visible to us. You might have another individual who owns various properties, for example, in the UK, and decides to put those into a trust, then set up an offshore trust and transfer between different companies. They might, to us, be a millionaire, but be very non-compliant. It is that range of risks that is why we find it really important to have a risk model rather than a wealth model, because otherwise we might be missing out on people who are causing more harm to the tax system than just the very wealthy.”

Non-doms 

Oliver Ryan (Ind) and Lloyd Hatton asked a series of questions about the taxation of non-doms, starting with one from Ryan about the expected impact of the recent reforms. John-Paul Marks said the OBR had certified a £34 billion central estimate for additional revenue and assumed a behavioural response of 12% to 25% of non-doms leaving the UK this year. Data to evaluate this assumption start to arrive in January 2027 tax returns.

What work is HMRC doing to ensure the changes actually mean more tax is collected, asked Hatton. Marks mentioned some of the features of the regime designed to reduce the behavioural response, such as the temporary repatriation facility. Philippa Madelin spoke about how closely those on the operational side are working with those on the policy side.

Hatton observed that the UK is, at the moment, the only country in the G7, aside from Italy, that allows very wealthy individuals to build up capital gains while living here, with no obligation to pay tax on those gains if they leave before selling. “Has HMRC done any work internally to look at what [an] exit tax might do in terms of making the non-dom tax regime changes truly effective,” he asked. “Policy will be a matter for ministers,” said Madelin, but she pointed to HMRC’s recent call for evidence on offshore avoidance legislation, saying it was an effort to make sure legislation in this area is fit for purpose.

Tax agents 

The committee returned from a short break to consider the role of tax agents, particularly unscrupulous ones (though the chair emphasised that he knows that “the vast bulk [of advisers] are very upstanding and make sure that their clients do pay the right amount of tax”).  This included an explanation from HMRC of how they engage with representative bodies through bodies such as the compliance reform forum and the representative bodies steering group. “We work very closely with them on a whole range of issues [and] certainly want to make sure that they are really well informed,” said Penny Ciniewicz.

Nesil Caliskan asked whether HMRC have a ‘systematic approach’ to working with tax agents for wealthy individuals to minimise the risk of non-compliance. John-Paul Marks highlighted HMRC's consultations focusing on raising behavioural standards, enhancing data use, and strengthening the ability to take action against tax advisers who facilitate non-compliance. He added: “When we think about things such as making tax digital, we are trying to nest the UK tax system increasingly in the natural systems of the economy, whether that be through software providers in the accountancy market, or the way in which people regularly record their receipts and expenses, and report their taxes”.

Lloyd Hatton observed that London “is a world-renowned hub for professional services… [with] an army of lawyers, accountants, promoters of schemes, and tax experts and advisers”. He wanted to know how HMRC are dealing with the challenge posed by “this army of people who go about their day-to-day lives helping the very wealthiest minimise their tax liabilities”. Marks said that it is about making sure HMRC have “the capacity and the capability”. Marks and Ciniewicz both pushed back against the solution that HMRC is being “outgunned”. Ciniewicz spoke of “a huge depth and breadth of expertise in HMRC” which they are seeking to expand “by bringing in wealth management expertise to help inform our understanding of how wealthy individuals manage their affairs”.

Hatton suggested HMRC does not use the powers at its disposal, stating that no penalties have been levied on the enablers of offshore tax evasion in the last five years. “Offshore is sometimes not the lead risk that might present,” said Philippa Madelin, telling the committee that HMRC have prosecuted 41 enablers in the last few years. She went on to say that HMRC’s use of powers has led to a significant reduction in the number of promoters of avoidance, now down to “20-ish active promoters”. Marks added that HMRC use their enforcement powers selectively and appropriately based on the nature of the risk. He reported that HMRC maintain an ongoing dialogue with ministers to request additional powers or support when needed to close the tax gap.

The wealthy tax gap 

Asked about HMRC’s upstream activities, John-Paul Marks spoke about the impact of Making Tax Digital. The evaluation of MTD for VAT was “pretty encouraging”, he said, explaining that HMRC hope to achieve the same for income tax with roll-out over the next few years. It is about “quarterly reporting that is up to date, enabling people to have accurate records, and reporting in a timely way” he said. “That will make a big contribution to upstream compliance and support a closure of the tax gap.”

Nesil Caliskan queried the accuracy of the current figure for the tax gap from wealthy individuals, suggesting that the £1.9 billion figure published by HMRC appeared ‘low’. Jonathan Athow defended HMRC’s methodology saying: “Around 75% of [the overall tax gap] is based on some very robust statistical methods”. More niche areas are more challenging due to the lack of external data for validation, but “we work very closely with [the compliance team] on what trends they are seeing and, from that, how we can understand how those risks might manifest themselves and how much might be at stake. Within [that] team, we have deep experts in terms of understanding some of those wealthy risks.”

Lloyd Hatton asked how HMRC calculated the £1.9 billion wealthy tax gap. Athow replied that HMRC take a comprehensive approach to reviewing all tax types and behaviours, adding: “One thing that we see in this area is what we call legal interpretation, so people pushing the boundaries of tax or trying to exploit where there is some ambiguity in how tax law should be applied.”

Philippa Madelin clarified that the focus is largely on personal taxes, including income tax, capital gains tax, inheritance tax and trusts. Taxes for businesses owned by wealthy individuals are not included, instead being part of the business tax gaps.

Hatton, seeking further clarity, observed that the tax gap has stayed under £2 billion for some time, however, the number of wealthy individuals has risen from 700,000 to 850,000. He continued that HMRC have recovered £3 billion more in unpaid tax from wealthy individuals through compliance efforts, but despite this, the net loss in tax revenue has increased by 21%. He asked: “How can the wealthy tax gap remain stable, the compliance yield increase and the net loss also increase at the same time”.

Athow explained that while the number of wealthy individuals has grown, their total income has also increased proportionally, keeping the tax gap stable at around 5% of liabilities. He continued, “What we are doing through our activity is keeping the tax gap at roughly a constant percentage of receipts, and that gives you your £1.9 billion”.

HMRC’s approach to compliance 

Nesil Caliskan expressed concern about how long it takes to close a wealthy compliance tax case. For investigations yielding more than £100,000, the average time that it took in 2023-24 was 40 months, up from 27 months in 2022. John-Paul Marks responded that HMRC was bringing in an increased average value from the cases it pursued due to focusing on higher-risk, higher-yield cases. Penny Ciniewicz explained that focusing on more complex cases had increased the average return per case from £34,000 to £94,000. She recognised that delays sometimes occur, but said HMRC are actively working to speed up inquiries.

Caliskan then voiced another concern that almost half of compliance investigations result in no yield. Marks responded that HMRC would like to reduce the number of such instances, but emphasised the need to empower compliance teams to carry out investigations in areas of concern. He stressed the importance of a risk-based approach in tax investigations of wealthy individuals, aiming for high-yield cases and undertaking lengthy investigations for complex cases, to ensure a deterrent effect.

Lloyd Hatton also criticised the low yield from investigations into wealthy individuals, asking why 46% of them conclude without any tax collection. Philippa Madelin explained that the goal is to ensure the ‘right amount’ of tax is paid. Sometimes an individual under investigation will be able to provide evidence that, in fact, they have paid the right amount of tax, and HMRC would close that investigation for nil. Then there are projects where HMRC see a risk in a particular sector: “Having changed our capital gains tax reporting requirements recently, we might, therefore, do a project that looks at whether people have reported on time, in line with the new legislation. That might then open inquiries into 500 wealthy individuals who we believe did not report on time. Of those 500, there will then be a percentage who, in fact, are able to demonstrate that they did, or that there was a reason that meant that they were unable to.” Marks refuted the notion of a low yield from HMRC’s investigations, emphasising improved productivity and exceeding targets.

Hatton wondered if there was a flight risk for wealthy individuals under tax investigation. Madelin said it was possible but it “is not something that we see a lot in our largest cases”. She does not have any examples from cases she has seen. She added that there are robust international collaborations under the Joint Global Chiefs of Tax Enforcement (J5) to ensure tax debtors cannot escape their obligations.

Caliskan said the committee had been told by professional bodies that many wealthy individuals and their agents found the length of time that it is taking for their cases to be resolved “highly frustrating”: “It is hindering their ability to get on with their own accounts and their business. There is an impact on them as individuals, and often as part of organisations, of stress, anxiety, and so on.” She pressed HMRC for a view of what the average wait time should be. Marks said HMRC want to close cases “as efficiently as we can” and would try to reduce the amount of time cases take where this is feasible.

Sir Geoffrey Clifton-Brown worried that delays increase the risk of losing track of individuals. Could AI help by identifying missing data and enabling more targeted communication? Marks and Ciniewicz agreed, saying that AI and digital tools have long supported risk assessment models. Ciniewicz added that ongoing investments will focus on improving data access and analytics, especially with the digitisation of the inheritance tax system.

Clifton-Brown also expressed concern about a noticeable decrease in penalties issued, with only 456 penalties being issued in 2023-24. Ciniewicz attributed this to varying circumstances and case types without any specific policy reason, while Madelin explained that the determination of penalties is influenced by tax loss and behaviours. She stressed that the percentage has fluctuated over the years. Marks said there would be an increase of 20% in charging decisions by 2030 which would lead to more prosecutions. Jonathan Athow explained the deterrent effect of tax evasion prosecutions on compliance, suggesting that it works “primarily through media and social media”.

Hatton said that, after a previous PAC session, the government had agreed to a recommendation to research which interventions—such as civil penalties versus criminal prosecutions—are most effective in deterring tax evasion and organised crime. He asked about the progress HMRC has made on this research. Athow replied that “the evidence is that the more severe the penalty and the more severe the sanction, whether that is a custodial sentence or anything else, the more likely it is to drive newsworthiness and therefore have a deterrent effect”. Marks stated that, at the end of 2023-24, HMRC had 399 wealthy individuals under criminal investigation, and secured 47 charging decisions in relation to wealthy individuals.

The offshore tax gap and international co-operation

The committee raised international issues in two sets of exchanges. The first saw Oliver Ryan and Geoffrey Clifton-Brown press HMRC on international co-operation. Ryan asked whether HMRC have set a timetable for tackling complex wealthy customer issues like connected entities, trusts, and crypto. Philippa Madelin emphasised that this is an ongoing effort, explaining that international data exchange, particularly the Common Reporting Standard, has improved HMRC's access to offshore financial and ownership data. She said that HMRC's aim is to raise an extra £6.5 billion overall, with £500 million specifically from wealthy offshore risks in the next 3–4 years.

The second set of exchanges focused on the ‘offshore tax gap’. Lloyd Hatton found it hard to believe that the gap was really as small as the £0.3 billion figure HMRC have published when UK residents hold £850 billion in foreign accounts, £570 billion of it in tax havens. Jonathan Athow explained that the figure was an estimate of the non-compliance relating specifically to overseas accounts covered by automatic exchange of information, but said that, yes, for that, £0.3 billion was an accurate estimate. HMRC had received information on 7 million accounts relating to 4 million people who were resident in the UK in the year in question. They matched the account data they had been given with what they had in their own records. Where there was a discrepancy, they took a sample of 400 of those cases, and worked them through to see how much was not compliant. The result was, for those cases where there is automatic exchange of information for assets held offshore, an estimated tax gap of £0.3 billion. He said the UK were, so far as he knew, the only country to have done that reconciliation. Madelin said HMRC have always been clear that the figure is not the totality of the offshore tax gap.

Hatton cited notable tax leaks such as the Panama papers, which he said had identified 100 UK-resident millionaires as tax dodgers. He asked when HMRC would publish the promised stand-alone strategy to reduce the offshore tax gap. John-Paul Marks said HMRC would set the next steps out in writing, but thought much of the strategy had been covered in today’s session.

Ryan said that, back in 2017, the PAC had looked at Australia and Japan, where high net worth individuals need to provide information about their assets in their tax returns, which makes it easier for tax authorities to assess, through their risk matrix, what they should be trying to go after. “In 2017, [HMRC] told us that this issue was being considered and looked at. Has there been any progress on that since 2017?” Madelin said the final policy decision on that would be for ministers, but added that “the removal of the non-dom regime and the need to then report foreign income and gains will, for the first time, give us enhanced information that we did not have before on those individuals.” Additionally, crypto-asset reporting is coming in 2027, and there is the register of overseas entities. “That combination of data does put us in a significantly enhanced position from 2017, when this was last discussed at this committee,” she remarked.

You can read the full transcript here and watch the hearing here.