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HMRC is set to hire 5,000 extra tax inspectors as part of a clampdown on small businesses and their owners, according to Price Bailey. The firm found that a report disclosed to a committee of MPs reported that 5,000 extra tax compliance staff will target small businesses and their owners for £6.5bn in additional revenue by 2029/30.
It comes as the share of the tax gap attributed to small businesses increased from 44% in 2018 to 2019 to 60% in 2022 to 2023, and the amount of the tax gap attributed to small businesses currently stands at £24.1bn.
According to data obtained by Price Bailey under the Freedom of Information Act, the number of HMRC customer compliance staff has jumped by 26% over the last three years, from 25,442 in 2021/22 to 32,017 in 2023/24.
Prior to the general election, the Labour Party identified offshore tax compliance as a focus for a plan to reduce the tax gap, which is currently estimated at £39.8bn.
Price Bailey claims this was “unrealistic”, and that targeting the UK’s 5.3 million small businesses was the best way to claim additional tax revenues.
Andrew Park, Tax Investigations Partner at Price Bailey, said: “With government borrowing costs rising and the Chancellor desperate to avoid more tax rises, there is growing pressure on HMRC to save the day by bringing in billions more in revenue. To make a serious dent in the tax gap HMRC will need to go after a vast swathe of ‘working people’ on ordinary incomes.
“We have been seeing increased HMRC scrutiny of small businesses and directors in recent years and this has intensified since the general election. HMRC has now confirmed that it is gearing up for a blitz on the UK’s small business sector just as it is being hit by increases to Employer’s National Insurance and the National Living Wage.”
He added: “HMRC has struggled to tackle some of the most egregious forms of tax evasion among small businesses such as electronic sales suppression in the retail sector and directors winding up companies to avoid paying tax debts only to set up new companies and continue trading. It is going to have to improve drastically.”
