Citywealth Quick Insight Series on Tax Trends – Hayley Ives and Jennifer McNally, national tax firm Crowe.
This week’s Citywealth Quick Insight Series on Tax Trends is dedicated to Hayley Ives and Jennifer McNally, national tax firm Crowe.
Helen Ives (left) and Jennifer McNally (right)
Hayley Ives, Partner, Tax Disputes & Investigations, Crowe
How are tax authorities using digital tools, AI, and data analytics to enhance enforcement—and how should advisors respond?
Across the UK and internationally, digital tools, advanced data analytics and artificial intelligence are reshaping how compliance risks are identified, prioritised and pursued.
Today, authorities such as HMRC are deploying increasingly sophisticated analytics to identify potential non compliance earlier and more precisely. A £175million deal with a technology provider, Quantexa was recently announced, which will help officers identify tax fraud and spot errors faster than ever.
HMRC’s most recent Annual Report [HI1.1]confirms growing reliance on data driven risk profiling, allowing the department to target resources at cases with the highest perceived revenue or behavioural risk.
The same is true around the world, with the OECD reporting [HI2.1]that more than 70% of tax administrations now use artificial intelligence or machine learning tools in compliance activity, particularly for anomaly detection, audit selection and fraud prevention.
HMRC’s Transformation Roadmap [HI3.1]sets out investment in modernised IT and linked datasets, enabling cross tax and cross regime analysis at speed and scale. Combined with automatic exchange of information and third party reporting, this significantly narrows the scope for inconsistencies to go unnoticed, which is a major part of HMRC’s plan to close the tax gap.
UHNWIs with multi jurisdictional and complex affairs must therefore be able to show they exercised due care with their reporting obligations to avoid scrutiny from global tax authorities.
As HMRC shifts its focus toward preventing non compliance rather than correcting it later, advisers must help clients “get it right first time” by ensuring robust documentation, consistent positions across taxes and jurisdictions, and written advice that clearly evidences reasonable care.
AI-driven risk tools are not infallible, so tax authority scrutiny can sometimes be misdirected and unavoidable. When that happens, experienced tax disputes and investigations specialists are essential to defend the position.
Jennifer McNally, Partner, Private Clients at Crowe
How would you summarize the current global tax environment for UHNW individuals and families? Are there particular jurisdictions that are becoming more (or less) attractive?
The global environment for UHNW individuals and their families is challenging due to a lack of stability both politically and economically. The UK has historically been seen as country with a stable economy and tax system that offered certainty. Over the past 5 years or so with changing governments and policies, UHNW individuals feel increasingly targeted. Whilst tax increases are inevitable in the current climate, the constant rumours regarding increases to various tax rates and the introduction of wealth taxes etc. have been far more damaging. Italy has proved an attractive destination with the annual flat rate tax regime of £100k, however the recent increase to £200k has proved a bit more challenging in attracting UHNW individuals as there is a concern that this may further increase. Dubai has also been a very popular destination, however due to the conflict in the Gulf Region, interest has definitely waned. Jurisdictions closer to home such as the Channel Islands and Monaco are proving popular again as these are considered stable from an economic perspective and safe from a personal perspective.
What are the emerging cross-border tax challenges facing wealthy international families today?
As people become increasingly mobile and spend time in multiple jurisdictions, care needs to be taken to ensure individuals and their families are well advised in terms of their residence position for tax purposes. It is possible for individuals to be resident in more than one country at a time which brings added complexity, particularly where global structures and business are involved. It is important, therefore, to ensure advisors are proactive to avoid unintended consequences for family wealth and businesses.
How is succession and estate planning being impacted by new inheritance, wealth, or exit tax proposals globally?
From a UK tax perspective, we are seeing an acceleration of wealth being passed to the next generation and charitable giving. The rate of UK inheritance tax on estates valued in excess of £325k (currently 40%) is among the highest in the world and the prospect of global wealth being within the charge when individuals are long term UK resident (10 years or more) has been deeply unpopular, particularly if the wealth and business has no connection to the UK. While individuals are in the main happy to pay their fair share of income and capital gains taxes on wealth, generated on an annual basis, the prospect of having 40% inheritance tax levied on the death estate is a bridge too far. It is difficult to resign yourself to prospect of what it is effectively double taxation.
Key Takeaways
- The Citywealth Quick Insight Series on Tax Trends features insights from Hayley Ives and Jennifer McNally of Crowe.
- Tax authorities like HMRC are using digital tools and AI for better compliance risk management.
- UHNW individuals face a challenging global tax environment, with concerns about stability and increasing tax rates.
- Emerging cross-border tax challenges require careful residence planning for wealthy international families.
- High UK inheritance tax rates are prompting changes in succession and estate planning.
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