The value of penalties HMRC is imposing on taxpayers each month has doubled in the last six months, according to financial advisers PfP
The firm said £41m was collected from penalties in November 2020, up 97% from the £21m that was collected in May. Penalties can be handed out to taxpayers for underpayment of tax or for submitting a tax return late.
It is believed that HMRC “paused much of its compliance and investigative work during the early months stages of the pandemic, resulting in a sharp reduction in penalties being handed out”.
PfP said HMRC “has pivoted in recent months to investigating potential cases of fraud in the Government’s pandemic support scheme schemes such as furlough and Eat Out to Help Out’.”
HMRC’s own estimates show that up to £3.5bn may have been fraudulently claimed or paid in error from the furlough scheme alone. With the scheme being extended until April 2021, PfP says there is “likely to be an increase in the number of businesses that are investigated for potentially-fraudulent furlough claims”.
Kevin Igoe, managing director at PfP, said: “HMRC took the pressure off tax evaders at the start of the pandemic but it’s ratcheting its investigations back up now.
“The huge amounts the Treasury has spent to try and stabilise the economy during the pandemic means that HMRC is going to come under huge pressure to recoup as much tax revenue as possible.”
He added: “The taxman will, therefore, be in no mood to go easy on individuals and businesses that they believe have underpaid tax. HMRC will be looking to make up for ground lost in 2020 – that means more investigations and more penalties are inevitable.
“With the number of investigations likely to continue to rise, having cover in place could be vital for a business in ensuring that it does take too large a financial hit if an investigation does come their way.”