- HMRC boosts compliance staff.
- Tax revenue decline concerns experts.
- Impact on small businesses anticipated.
Her Majesty’s Revenue and Customs (HMRC) has taken steps to bolster its compliance division, aiming to reverse a sharp decline in tax revenue. Recent data indicates that HMRC has hired over 3,000 additional personnel for its compliance department since the 2021/22 financial year. However, experts warn that this may not significantly benefit business owners. A report from the Public Accounts Committee revealed a drop in tax revenue from HMRC’s compliance work, falling from an average of 5.2% before the pandemic to 4.2% in 2021-22, attributed in part to fraudulent use of Covid schemes.
The data shows that the number of tax inspectors in the Fraud Investigation Service, a specialized unit within customer compliance, has increased by 539 staff in the last year. This expansion is expected to lead to more targeted investigations in the coming years. HMRC now possesses significantly more compliance resources, and experts anticipate an increase in enforcement activity over the next one or two tax years.
While compliance is crucial for HMRC to ensure the correct payment of taxes, the impact on small businesses remains uncertain.
HMRC may focus on anti-money laundering efforts, with a heightened emphasis on inheritance tax errors. Routine inquiries may become more common for average businesses. The decision to reinforce the compliance team while closing customer service helplines has raised questions about customer service quality.
While HMRC’s digital services are evolving, concerns persist about the level of support provided to businesses and individuals. Experts suggest that HMRC needs to work collaboratively with taxpayers rather than adopting a punitive approach, reserving heavy penalties for cases of fraud and tax evasion.
Overall, the increase in compliance staff is seen as beneficial for the Treasury. But potentially challenging for individuals and businesses seeking assistance from HMRC.