HMRC tax investigations net almost £31bn in 2021

HMRC tax investigations net almost £31bn in 2021
HMRC generated £30.8bn from tax investigations and other compliance activity in 2021, up from £28bn in 2020, research by City law firm Pinsent Masons has found.
The Revenue suspended some tax investigations work for part of 2020, as it was tasked with delivering the furlough and other government aid schemes.
With the furlough scheme now closed, HMRC has been taking a tougher stance on tax errors and avoidance in the past year and ramping up compliance activity as it looks to make up for the shortfall, said Steven Porter, a partner at Pinsent Masons.
In the past year, HMRC has collected £5.8bn in cash from its tax investigations activity and prevented a further £11.2bn in revenue being lost. It has also benefitted by £6.4bn from closing tax loopholes, such as one which allowed owners of second homes to avoid tax by claiming their often-empty properties are holiday lets.
One key area of focus for HMRC is investigating tax it believes is underpaid by the biggest businesses. Income from investigations into the 2,000 biggest businesses in the year to 31 March 2021 brought in £8.6bn.
It also accounted for 28% of all HMRC’s tax investigations yield last year. HMRC believes that £35.8bn of tax may have been underpaid by big businesses over the same period.
Porter said the enormous return on investment from large business investigations means HMRC is likely to continue targeting them in 2022 and beyond.
The firm found that HMRC’s Large Business Directorate, the team responsible for investigating the tax affairs of the UK’s biggest and most complex businesses, had a staff bill of £125m, generating a 6,800% return on investment on the £8.6bn it brought in.
“In the past year HMRC has ramped up its activity even further as the lenience it showed during the pandemic comes to an end.
“HMRC undertakes a huge programme of compliance activity every year. This ranges from property raids to social media monitoring to closing tax loopholes,” Porter said.
“This goes for large corporates as well as smaller businesses and individuals. HMRC’s stance on corporates underpaying tax has hardened significantly in recent years and is only likely to get tougher as it uses international data, big data and artificial intelligence to help it pursue unpaid tax,” said Porter.
“HMRC has been investing in its compliance work significantly and is generating great returns as a result. This should act as a reminder to individuals and businesses that HMRC will not let up on its pursuit of recovering unpaid tax.”