HMRC targets tax payments by directors and senior executives

pic courtesy-The guardian
financial reporter(weastar times/The Gurdian):::The taxman is stepping up investigations into the contributions paid by directors and senior executives of the nation's largest companies, with a particular focus on avoidance of the 50p rate and the special tax on bankers' bonuses.

The division at HM Revenue and Customs that oversees the largest 770 UK companies is looking into some £400m of underpaid taxes, according to analysis by law firm Pinsent Masons.

The sum is 43% higher than the £280m under investigation last year, and suggests that HMRC has increased its focus on the nation's most highly remunerated employees as executive pay has rocketed.

Inspectors plan to use new powers including those for tackling "disguised remuneration", where earnings normally subject to income tax or national insurance are artificially structured to avoid payments.

"Typically, [HMRC] will be looking into executives' non-payroll packages, which are often an area where individuals can make mistakes with what they report," warned Pinsent Masons partner Jason Collins. "The 50p tax brought in less than expected, so this may have set alarm bells ringing for tax investigators. It has proved to be too easy for individuals and companies to find ways of not paying them through tax planning – probably assisted by the expectation that the rate was only intended as a short-term measure so planning could merely involve delaying the receipt of income."

HMRC is taking a special interest in cases where income or an individual's role at a company has been structured to reduce their tax burden, particularly for pay as you earn (PAYE) and national insurance levies.

In 2010 the Labour administration introduced a new top rate of 50% on income over £150,000, but the current chancellor of the exchequer, George Osborne, cut the rate to 45% in the 2012 budget.

Inspectors will look at whether "abusive" tax avoidance or evasion has taken place, and will demand extra tax if they feel it is due, Collins said.