HMRC is reportedly set to recruit 5,000 more tax inspectors to chase £6.5 billion in unpaid or late tax from small businesses and ‘normal income earners’.
The clampdown was revealed in the HMRC Customer Service & Accounts report published this week.
According to data obtained by accountant Price Bailey under the Freedom of Information Act, the number of HMRC customer compliance staff has jumped by 26% over the last three years.
Price Bailey, a Top 30 accountancy firm, told Accountancy Age that the recruitment drive would mean there would be one additional tax inspector for every 1,000 small businesses across the UK.
The move represents a significant shift in HMRC’s enforcement strategy, targeting the country’s 5.3 million small businesses and sole traders.
This week, MPs slammed HMRC for its poor customer service. The Public Accounts Committee said HMRC had kept 44,000 customers on the phone and then cut them off after they had been left waiting for 70 minutes.
It also criticised HMRC for writing off £5bn in unpaid taxes and for not doing enough to pursue older debt, instead choosing to target small businesses with cashflow rather than debt issues.
This week, MPs asked HMRC to do more to chase unpaid taxes and look after customers who don’t file tax returns online.
HMRC has been slammed for failing customers and undermining public confidence by allowing tax avoidance to run rife.
The UK’s tax authority, which collected around £1,100bn in taxes last year, was also reprimanded by the Public Accounts Committee for cutting off 44,000 customers who had waited 70 minutes on the phone to speak to an adviser.
HMRC was accused of writing off £5 billion in unpaid tax last year when it should have done more to pursue long-term debts and of underestimating the amount of unpaid tax being funnelled into offshore accounts.
MPs said HMRC’s already poor service has become “even worse” in a year when over three million more Brits are set to become taxpayers.
MPs called on HMRC to set out a plan for collecting old debts owed to it before they become ‘uncollectable’.
In 2023-24, £5 billion in debts were written off by HMRC, up from £3.2 billion 2022-23, with a risk this could apply to an estimated 45% of total debt owed.
The committee said the HMRC’s estimate of £0.3 billion lost through overseas tax evasion was “implausibly low” and it needed to get a handle on the amount of money being lost to offshore bank accounts.
Since the report HMRC has been given £51 million additional funding to cover 1,500 staff for 2024-25 to bring its customer service to target levels.
The committee said it was concerned that performance would deteriorate again if HMRC struggled to meet further increases in customer demand.
HMRC was told it needed to make more use of its powers; there were only 344 criminal prosecutions in 2023-24, compared with 691 in 2019-20.
“We are concerned that HMRC is not using the criminal enforcement tools at its disposal. There have never been any prosecutions under the criminal facilitation of tax evasion offence.”
Jim Harra, First Permanent Secretary and Chief Executive, HMRC, said the committee’s claims were “completely baseless”.
“In reality, we’ve made huge improvements to our service standards, with call wait times down by 17 minutes since April last year.
“We will always be there to answer the phone for those who need extra help. At the same time, more than 80 per cent of customers are satisfied with our digital services, with more and more people using them to quickly and easily manage their tax affairs.”