HMRC spent 6.5% of budget on tackling tax avoidance

In HMRC’s annual report for 2022/23 the tax office disclosed that it invested £451 million in addressing “specific areas of tax evasion, avoidance and non-compliance”

HMRC has been condemned for spending just 6.5 per cent of its £6.8 billion annual budget on preventing particular areas of tax evasion, avoidance and non-compliance in 2022/23.

In HMRC’s annual report for 2022/23 the tax office disclosed that it invested £451 million in addressing “specific areas of tax evasion, avoidance and non-compliance”. This equates to just 6.5 per cent of the tax authority’s £6.8 billion spending in the 2022/23 financial year.

As part of HMRC’s strategy to stop tax avoidance schemes, the tax office named 27 promoters and 5 directors, besides details of the 31 schemes they were promoting. 13 ‘Stop Notices’ were also issued, which require promoters to stop selling or promoting a scheme.

However, umbrella company compliance specialist, PayePass, termed this a “drop in the ocean” and spurred HMRC to invest more in tackling the proliferation of tax avoidance schemes posing as umbrella companies.

In recent months, the government published draft legislation which would mean the most persistent promoters of tax avoidance could be issued with limitless fines and imprisonment for up to two years if they fail to abide by a ‘Stop Notice’ issued by HMRC.

Julia Kermode, Chief Executive Officer of PayePass, said: Above all else, HMRC’s accounts show that more needs to be invested in putting a stop to tax avoidance schemes once and for all. Tax avoidance schemes result in billions slipping through HMRC’s fingers, so 6 per cent of around £7 billion worth of spend raises questions over how seriously the government is taking this issue.

Kermode said, had appropriate enforcement been in place, the government would not have brought in its draconian Loan Charge policy, which has had devastating impact on tens of thousands of innocent people who are being pursued for unpaid tax.

The return on investment from preventing tax avoidance schemes is huge, and the resulting income would more than cover the costs of doing so – it is a no-brainer.

Kermode added: What is more, apart from damaging the economy, these schemes result in devastation to thousands of workers who they tempt in under the pretence that they are fully compliant umbrella companies. And I am all for naming and shaming tax avoidance schemes, but 31 is a drop in the ocean.