Tax evasion in the retail sector

HMRC estimates that £5.5bn of tax was lost due to evasion in 2022-23. This is equivalent to 0.7% of total theoretical tax liabilities, and is most prevalent among small businesses. Of these estimated evasion losses, 81% come from small businesses including companies, partnerships and sole traders. This has risen from 66% of losses in 2019-20. … Show more

HMRC estimates that £5.5bn of tax was lost due to evasion in 2022-23. This is equivalent to 0.7% of total theoretical tax liabilities, and is most prevalent among small businesses. Of these estimated evasion losses, 81% come from small businesses including companies, partnerships and sole traders. This has risen from 66% of losses in 2019-20. These losses prevent a level playing field between businesses by giving evaders an unfair competitive advantage, and deprive the public purse of its revenue. The National Audit Office (NAO) reported in 2024 that tax evaders can easily exploit government systems. Significant weaknesses remain around making fraudulent company registrations more difficult, with gaps in checks around online retailers. VAT non-compliance by overseas retailers selling goods and services online resulted in estimated losses of around £700m, according to the report, of which around £300m was deliberate evasion. The Committee has long scrutinised HMRC’s work to tackle tax non-compliance, evasion and fraud. The Committee warned in 2017 that British businesses were being hit hard by illegal tax practices in its report on tackling online VAT fraud and error , while its report on managing tax compliance following the pandemic called on the tax authority to ensure for it never to be easier to cheat the tax system than to comply with it. Based on the 2024 NAO report, the Committee will hear from senior HMRC and Treasury officials on subjects including: - HMRC’s strategy to tackle tax evasion in retail; - Reducing risks of tax evasion; and - How effectively HMRC responds to different methods of tax evasion in retail. Please note the Committee is unable to assist with individual cases. Please look at the requirements for written evidence submissions and note that the Committee cannot accept material as evidence that is published elsewhere. If you have evidence on these issues please submit it here by 23:59 on Thursday 05 December 2024. Show less