HMRC Recruitment Drive
The Government has confirmed that 5,000 new HMRC compliance officers will be recruited, with the first 200 of these starting in November. This is expected to cost £1.4 billion over 5 years and raise £2.7 billion by 2029/30. The policy move is designed to close the ‘tax gap’ but this will take time to have an impact ‘on the ground’ as it can take several years before an HMRC compliance officer completes their training. As a result, the increase in enquiry activity may not be seen for a couple of years as the new officers attain the necessary experience. This perhaps explains why, if looking for short term wins, there is a heavy commitment to investment in IT and improving the data HMRC receives. In other words, placing a greater reliance on analytical tools to drive a more targeted approach to investigations and focus on high-risk sectors.
Focus on debt collection
In addition to the 5,000 new HMRC compliance officers there is also a plan to recruit 1,800 debt management officers which is expected to raise £2.7 billion in additional revenue per year by 2029/30. We do not know what, if any, impact this will have on HMRC’s attitude to collecting tax debt but this measure, coupled with an increase in late payment interest rates from April 2025, makes it even less attractive to ignore tax debts building up. We expect to see an even less empathetic approach from HMRC and the £12 million to acquire credit reference agency data will allow HMRC to better target their debt collection activities.
IT Investment
Significant financial investment to improve HMRC’s use of IT have been announced. The main areas of focus are on helping to identify so-called ‘tax ghosts’. i.e. those who are not known to HMRC, and in efforts to tackle offshore non-compliance. There is also a commitment to invest £154 million to modernise HMRC’s debt management system.
Criminal investigations and tax fraud
HMRC will be tasked with commencing more criminal investigations and we expect to see more taxpayers invited to settle their affairs under Code of Practice 9 where civil procedures are deemed appropriate. It is important those who accept they have deliberately understated their tax liabilities seek professional advice urgently and do not wait for HMRC to come calling. This comes at the same time as the Government confirming the financial rewards offered to tax informants are going to increase.
More consultation documents
An overriding message from the Budget announcements concerned the Government’s commitment to closing the tax gap. Arguably a little light on detail at this time, instead we can expect a number of consultation documents in 2025 in various areas. These include, “Enhancing HMRC powers and sanctions against tax adviser facilitated non-compliance”, “Tackling promoters of marketed tax avoidance”, “New ways to tackle tax non-compliance” and “Simplifying and improving tax administration”.
Summary
In summary, the strategy to close the ‘tax gap’ appears to be threefold. Recruit more HMRC officers, significant investments in IT and taking a more targeted approach to enquiry work. None of the ideas appear are new, but if the Government sticks to its plan, then it will undoubtedly lead to more tax investigations. The advice then is simple, if tax irregularities are known to exist there is no benefit in waiting and professional advice should be sought urgently to make the necessary corrections.
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