HMRC increase measures in Tax compliance

Increased Tax Compliance Measures Lead to £11.4bn in Unpaid Tax as Investigations increased.
HM Revenue and Customs opened 23% more inquiries into unpaid value-added tax (VAT), resulting in £11.4 billion of unpaid tax. This information was obtained through a freedom of information request by Thomson Reuters. Last year, 109,400 investigations were opened, up from 88,700 in the previous year.

The largest expansion of scrutiny was directed towards wealthy individuals and mid-size businesses, while the largest sum came from an increase in large-scale business VAT probes. The number of investigations in the division examining these entities grew by 60%, from 3,253 in the financial year ending March 2022 to 5,203 in the year ending March 2023.

Increases were also observed across the three sections ensuring VAT compliance. Cases opened into individuals and small businesses rose by 22%, whereas cases into large businesses increased by 17%. The largest increase in VAT compliance investigations, however, came from the large businesses section, which took in an additional £5 billion last year.

VAT accounts for approximately 20% of the total tax take, making it one of the largest revenue sources for the state, along with national insurance and income tax. To recoup greater tax yields, additional resources were given to the HMRC, including the addition of more than 3,000 staff to customer compliance units since the 2021 to 2022 financial year.

Despite the increased efforts, the gap between what HMRC estimated it is owed in VAT and what it collected was greater last year than the year before. The gap stood at £8.8 billion in the 2022-2023 tax year, up from £7.6 billion in 2021-2022, contradicting a previously downward trend.