HMRC investigations up 36%
Friday, 27 August 2021
New data shows HMRC opened 102,000 compliance investigations into taxpayers it suspects of tax evasion and avoidance in Q1 2021, up 36% from 75,000 in the previous quarter.
The rise in investigations suggests HMRC is beginning to scale up its enforcement activity against individuals that have underpaid tax.
HMRC’s tax investigations were disrupted in the early stages of the pandemic. In particular, lockdown restrictions made it difficult for HMRC to carry out in person investigations, with much of its work having to shift online.
A large part of HMRC’s resources were also reallocated to help administer the furlough scheme. However, with the scheme coming to an end in September, it's expected HMRC will be able to carry out its tax investigations at near full capacity again.
It’s likely HMRC has already begun shifting its focus back to investigatory work, with the number of workers using the furlough scheme falling 375% over the last year – down from 9 million in May 2020 to just 2.4 million in May 2021.
The amount of revenue HMRC has brought in from its compliance activity has also risen significantly to £14.2bn in Q1 2021, a 29% increase from £11bn in the same period in 2020.
HMRC is working hard to recoup any funds lost during the pandemic and catch up on the tax investigations it didn’t previously have the capacity to carry out.
Figures show HMRC’s total revenue from tax receipts has fallen by nearly £50bn from April 2020 to April 2021. This is partly due to HMRC allowing taxpayers to defer their self-assessment and VAT bills during the COVID-period which will have further exacerbated the hole in HMRC’s revenue.
A fall in revenue is often followed by an emphasis on increasing the amount of money coming in. As a result, HMRC will be looking to take action against those who they suspect of any wrongdoing, to ensure they can swiftly recuperate tax owed.
With HMRC refocusing it efforts towards tax investigations, taxpayers need to be proactive by staying on top of their tax affairs. Those who are concerned that they may have underpaid tax should act quickly to avoid any negative repercussions.
Tax investigations can be very stressful and costly for those involved. We offer a Tax Enquiry Protection Service backed by PFP who specialise in this area. You can protect yourself against the cost of most tax investigations by subscribing to our Tax Enquiry Protection Service.
Please speak to your usual Larking Gowen contact, or Jo Bateman, on 01603 937 904, who will be able to provide you with more information and a quote for joining our Tax Enquiry Protection Service.