Tax 'hit squad' targets dodges of new rich

Anyone earning more than £70,000 to face rigorous scrutiny over pay to nannies, cleaners and drivers
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The Inland Revenue is setting up an élite unit of tax inspectors to crack down on the perks of the new rich. Anyone earning £70,000 a year or more will be at risk of investigation.

The Inland Revenue is setting up an élite unit of tax inspectors to crack down on the perks of the new rich. Anyone earning £70,000 a year or more will be at risk of investigation.

The unit will take a special interest in the tax returns of people using nannies, handymen and chauffeurs. Private staff are regularly hidden on corporate payrolls so that nannies become company secretaries, domestic cleaners become office sanitation operatives and personal chauffeurs become courier managers.

There will also be a clampdown on the family meal that turns into a working lunch - dodgers can currently save up to £40 tax by claiming a £100 meal on company expenses, while office furniture frequently turns up in employees' homes.

The Inland Revenue is convinced that many private staff are hidden on corporate payrolls and that such ploys cost it tens of millions of pounds.

A former tax inspector condemned the exercise as a waste of money and resources, accusing the Revenue of "fishing for minnows".

A spokesman for the Revenue confirmed last night that it was setting up a crack unit within the special compliance office to look more closely at "high-net-worth individuals".

"We are looking at how we can help people manage their tax affairs more efficiently and one of the ways we can do that is look at people who are wealthy, because by definition they have more complex affairs and we can concentrate our expertise on them," he told the Independent on Sunday. "That is the thinking behind it. We just want these people to pay the right tax - no more, no less."

The unit will be based in London and will select wealthier individuals who will be ordered to return their tax forms directly to the department rather than through their local tax office, where inspectors are less experienced in some of the cannier dodges.

The Revenue has still to decide how much a person will have to be earning before it asks that their returns be scrutinised by the new unit.

Accountants, who regularly audit the books of the new rich, reckon that there has been a rise in the number of people working in domestic service "not seen since Victorian times".

Inspectors were reported to have begun an investigation into the tax affairs of the Duchess of York last month over the £100,000-a-year payments made to her nanny, chauffeur, secretary and office administrator.

The inquiry centres on whether the duchess's financial advisers deducted the correct amount of tax from their pay and forwarded it to the Inland Revenue. If there is a shortfall, the duchess could be fined and forced to pay the sum owed plus interest at 8.5 per cent. That kind of action will become more frequent once the new unit is up and running.

Chris Chadburn, a former tax inspector, now a partner with Baker Tilly, an accountancy firm. is critical of the new unit.

"In the Revenue's view, someone who is listed as a maintenance engineer on a payroll might actually be the managing director's chauffeur or handyman, or someone called a secretary could actually be his wife's au pair," he said.

"But while I can appreciate the Revenue's desire to uncover fraud and recover monies due, it is wasting government resources on this ridiculous niche operation. Is this an intelligent or sensible use of inspectors' time? They should concentrate on generating mainstream results - not fishing for minnows."