HMRC has launched 137,000 tax investigations in the six months to December 2021, up 9% from the 126,000 investigations in the same period last year, according to tax investigation insurance experts PfP.
This means that HMRC opened the equivalent of 1,062 tax investigations per day over the period.
It comes as HMRC is “ramping up” its compliance activity as it looks to make up for revenue lost during the pandemic. Until recently it had been exercising a “considerable degree of forbearance towards individuals and businesses falling behind on their tax affairs”.
PfP said that individuals under investigation will see their tax affairs heavily scrutinised going forward, with in-person visits and property searches returning as social distancing measures are lifted.
In addition, HMRC will now be allocating more resources to investigations as staff previously working on pandemic programmes such as furlough are freed up for other duties.
It forms part of HMRC’s effort to make up for the loss to the taxpayer from pandemic-related fraud and error, which the Public Accounts Committee recently estimated to amount to £15bn.
In light of this it is also likely to push for harsher penalties, according to PfP, while late payment interest increased this month from 2.75% to 3%.
Kevin Igoe, managing director at PfP, said: “This jump in tax investigations comes as the Government seeks to fill the black hole left in the public finances by the pandemic. Opening over 1,000 new tax investigations per day shows HMRC has really picked up the pace. The Revenue clearly sees increased compliance activity as one way to balance the books.
“We advise anyone with undeclared tax to approach HMRC without delay to avoid a costly and time-consuming investigation. The Revenue will always look more favourably on taxpayers who come forward with unpaid tax.”
He added: “Businesses and individuals would also be wise to ensure they have the insurance cover in place to safeguard against the significant impact on finances an investigation may have.”