Taxing the wealthy is “at the heart of Liberal Democrat thinking” according to the delegates at their annual conference in Brighton.
The party made tax a feature of many of their speeches and Chief Secretary to the Treasury Danny Alexander announced a series of measures and proposals aimed at recouping as much personal tax as possible.
One such measure is that HM Revenue & Customs’ (HMRC) ‘affluence Unit’ (AU) is to target homeowners with properties worth over £1m in a new crackdown on people with an affluent lifestyle. And if they suspect that such people are not paying enough tax, they will have the power to ask them to account for their earnings or how they acquired the property.
The number of staff at the AU will increase from 200 to 300to manage the additional workload and will use IT software to look across files and records to work out anomalies in people’s tax affairs that suggest there might be avoidance going on.
Set up last year to raise an extra billion pounds in extra tax within three years, the AU now has around 500,000 people in its sights, as its scope includes anyone with property worth £1m.
Originally, the unit was targeting people described as “high net worth” individuals, who have a net wealth of between £2,5m and £20m and are paying the 50 per cent top rate of income tax.
And in other proposals considered at the conference, it was suggested that Inheritance Tax (IHT) be scrapped in exchange for a mansion tax on properties worth over £2m.
IHT is thought to be an unfair tax by many Lib Dems, because it effectively gets charged twice, as it taxes funds on which income has already been paid and it can be circumvented by the use of wills, gifts and trusts.
However, as IHT is the biggest wealth tax in the current tax system, scrapping it is unlikely to find favour with the Treasury.
While in another announcement, Mr Alexander unveiled plans to double the size of the HMRC team working on the Liechenstein Disclosure Facility (LDF), as part of a crackdown on people he accuses of “hiding” assets in offshore havens.
The LDF gives individuals with undisclosed income in Liechtenstein the opportunity to come forward and pay with a reduced penalty, capped at 10 per cent of tax evaded over the past 10 years. Up to 5,000 British investors are thought to have secret accounts in Liechenstein.
The Labour Government signed a deal in 2009 with Liechtenstein to recoup lost tax and expected the agreement to raise £1bn. However this Government now believes that the LDF could yield as much as £3bn to the Treasury, which is why it is devoting the extra manpower to the unit.
