Chancellor Rachel Reeves pledged to invest in clamping down on tax avoidance and fraudsters as part of her Spring Statement in the House of Commons this afternoon.
Reeves she is boosting “investment in cutting-edge technology” for the Government’s tax authority as Labour attempts to bolster growth in the economy.
She said the Government is “investing in the HMRC’s capacity to crack down on tax avoidance and setting out plans to increase the numbers of tax fraudsters charged ever year by 20 per cent”.
According to Reeves, these reforms will raise £1billion additional revenues, which take the total raised from the Chancellor’s clampdown on tax avoidance to £7billion.
The Chancellor confirmed a clampdown on tax avoiders
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Earlier this year, HM Revenue and Customs (HMRC) confirmed plans t to hire 5,000 additional tax inspectors as part of a major clampdown on small businesses and their owners.
The expansion, announced in the HMRC Customer Service & Accounts report published, look to secure £6.5billion in additional revenue by 2029/30.
Based on HMRC’s June tax gap report, small businesses now account for 60 per cent of the overall tax gap, up from 44 per cent in 2018-19.
The current tax gap attributed to small businesses stands at £24.1billion. Data from firm Price Bailey reveal HMRC’s customer compliance staff has increased by 26 per cent over the past three years, rising from 25,442 in 2021/22 to 32,017 in 2023/24.
The tax authority is expected to be given more powers to clamp down on tax cheats
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The Government department estimates that tax evasion cost the country £5.5billion in lost revenue during the 2022-23 year.
Some 81 per cent of this figure could be attributed to small businesses, according to the Public Accounts Committee (PAC).
Notably, legislation making online marketplaces liable for VAT from overseas sellers led to £1.5billionn in additional taxes per year, five times greater than HMRC predicted.
According to PAC, HMRC may have underestimated the level of tax evasion occurring and is calling on HMRC to assess the reasons behind this gap.
The report, which was published last month, was concerned about the lack of curiosity shown by HMRC to investigate the issue.
PACR reports that its inquiry found that anywhere between five per cent and 20 per centof UK registered companies were fraudulent in 2023.
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Britons could be targeted in the tax clampdown
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Sir Geoffrey Clifton-Brown MP, Chair of the Committee, said: “It is of deep concern that the many billions in tax rightfully meant for the public purse could just be the tip of the iceberg.
“Not only that, but our own tax authority has not sufficiently curious with a view to accurately diagnosing the problem. Though we acknowledge the inherent difficulty of the issue, it is clear that more must be done to clamp down on fraud and root out the bad actors who are taking advantage of loopholes in the current system.
“It is unfair on those who abide by the rules to be undercut by those that are evading their obligations. There has to be a real willingness by those in charge of Companies House to effectively use the powers they’ve been given.”
