Closing the Gap: MS Taxes Tells You What HMRC Has Been Doing Recently 

Closing the Gap: MS Taxes Tells You What HMRC Has Been Doing Recently 

Introduction: 

In recent years, the UK's tax landscape has witnessed a significant shift with an increased focus on tax compliance measures. This case study explores the outcomes of these efforts, revealing a noteworthy £11.4 billion in unpaid tax recovered by HMRC. The surge in investigations, particularly targeting wealthy individuals and mid-size businesses, highlights a concerted effort to bridge the tax gap and ensure a fair contribution to public finances.

Background: 

During the financial year 2022/23, HMRC intensified its pursuit of tax evaders, opening 23% more inquiries into unpaid VAT. The total number of investigations reached 109,400, a substantial increase from the previous year's figure of 88,700. This comprehensive approach encompassed individuals, small businesses, and large corporations.

Key Findings:

1. Wealthy Individuals and Mid-Size Businesses:

Investigations into wealthy individuals and mid-size businesses surged by 22%, emphasizing a strategic targeting of high-net-worth individuals and businesses with substantial financial activities.

1. Large Businesses:

Cases opened into large businesses increased by 17%, indicating a focused effort to scrutinize the financial practices of major corporations.

1. VAT Compliance Investigations:

The most significant boost in recovered funds, £5 billion, resulted from VAT compliance investigations targeting large businesses. This underscores the effectiveness of targeting this sector to close the tax gap.

1. Tax Gap Increase:

Despite the successful recovery efforts, the tax gap between HMRC estimates and actual collections widened to £8.8 billion in the 2022/23 tax year, up from £7.6 billion in the previous fiscal year. This suggests an ongoing challenge in fully closing the gap.

Conclusion: 

The case study provides a detailed overview of the impact of heightened tax compliance measures, showcasing substantial gains in recovering unpaid taxes. While the focus on wealthy individuals, mid-size businesses, and large corporations has proven effective in recouping funds, the widening tax gap highlights the need for continued efforts and innovative strategies to ensure sustained progress in closing the divide between estimated and collected taxes. This case study serves as a valuable reference for policymakers, tax professionals, and businesses alike, emphasizing the importance of proactive compliance measures in maintaining a robust and equitable tax system.

Most HMRC enquiries are based on evidence that HMRC has uncovered from various sources. But it is important to go through the enquiry with a fine-tooth comb or HMRC will try and get more than they are owed. We have different levels of services:

1. Have an initial meeting with us, we will tell you your options and how we would fight your case. Then you decide to go it alone, this may be the best decision if you don’t have any assets to protect but always best to get some advice or it could turn to Cop-8 which is criminal.
2. If you have assets to protect and a viable business you need to instruct MS Taxes or another adviser to fight your case. This removes the HMRC headache and gives it to us. We also argue your case and get you the best result! And do everything in between.

If you have a HMRC letter do not hesitate to contact us now.