For years, HMRC has struggled to get all the tax it’s owed. The “tax gap”, which measures the shortfall between what the government is owed and what lands in the coffers, has swelled to £40billion.
Some experts reckon it’s even bigger, pushing £100billion. And the Chancellor is keen to collect.
While the Tories were sometimes accused of going soft on tax evasion, Labour is taking a much firmer line.
Reeves has poured £100million into HMRC, hiring battalions of compliance officers and forensic investigators.
These aren’t box-ticking pen-pushers. They’re trained to squeeze out every penny they can find. And if they succeed, they more than pay for themselves.
But it’s not just humans doing the heavy lifting. HMRC has embraced cutting-edge artificial intelligence (AI) tech to sort through the data haystack and flag anything that looks remotely suspicious.
Algorithms never get tired. They don’t miss lunch breaks. And when they’re programmed correctly, they don’t miss much at all.
And it’s working.
In the tax year to April 2024, specialist investigations alone brought in £1.5billion, new figures from law firm Pinsent Masons show. That’s more than double the £713million recovered the previous year.
Overall, HMRC took in an extra £5.1billion from “interventions”, as it ramps up the pressure on anyone with a complicated tax profile.
HMRC is mostly targeting people with incomes above £200,000 or assets over £2million, but lower earners could get caught too. And it’s taking no prisoners
Ian Robotham, legal director in tax disputes at Pinsent Masons, says Reeves has set HMRC “very hard targets”. “It’s hard to see how they can achieve them without a sharp rise in tax investigations.”
He added: “The scale of specialist investigations shows HMRC has already been clamping down much harder on those suspected of underpaying tax.”
But the real game-changer? Big data, AI, and digital surveillance.
Taxpayers need to tread carefully. As I’ve warned before, there really is no hiding place from HMRC’s digital dragnet.
HMRC Connect is the taxman’s most powerful weapon. It already holds years of your tax returns and runs them through algorithms to sniff out discrepancies.
But that’s just the start.
It hoovers up data from the DVLA, DWP, Land Registry, Companies House, council records and more.
Connect also has legal access to data from banks, building societies, credit agencies, crypto exchanges and online payment providers.
It even tracks your social media. Every public post, tweet or LinkedIn brag could be building a case against you.
It knows your Airbnb listings, your eBay sales, your Etsy side hustle. It’s tracking your flight records, child benefit claims and even private school payments.
In one sense, that’s fair. If you’re fiddling your taxes, the rest of us pay the price.
But this clampdown is arriving at the very moment taxpayers feel battered by Reeves’s constant tax hikes.
Many may be tempted to push their luck – and that’s when HMRC will pounce.
I only wish Reeves and HMRC would put similar effort into tidying up the UK’s insanely complex tax legislation.
Simplifying the rules would help honest taxpayers play by them – and might raise more revenue in the long run.
Reeves could focus her efforts there next. Or even cut taxes so people don’t feel the need to dodge them in the first place. As if!
