HMRC’s compliance strategy is under the spotlight, says TaxWatch’s Mike Lewis.
The UK is in a fiscal tight spot. The Chancellor has promised to raise an additional £7.5 billion over the next four years by boosting HMRC compliance efforts. The Autumn Budget is likely to see more measures intended to make this number go up: perhaps extra compliance funding, new powers, additional anti-avoidance legislation.
None of this is new. Successive governments have looked to the tax gap, rightly, as a way to balance the books without raising taxes. What matters is how it’s done. As a recent address to the Chartered Institute of Taxation by ex-FIS head Simon Yorke reminded us, the ‘strategic intent’ of HMRC’s compliance efforts has varied over time: from the ‘volume crime’ approach to criminal enforcement targets in the 2010s; through to prioritizing defences against non-compliance such as tightening VAT registration to counter carousel fraud; and resourcing the long, complex, cross-border investigations needed to boost compliance yield from small numbers of highly lucrative ‘whales’ like Bernie Ecclestone.
It remains to be seen how HMRC’s promised £1.7bn of additional compliance funding and 5,500 new compliance officers are going to be deployed. This year’s tax gap publication, however, put the spotlight squarely on one area: small business non-compliance, now responsible for 60% of the tax gap, according to HMRC.
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