Source · Select Committees · Public Accounts Committee
Recommendation 6
6
HMRC’s plans to tackle the part of the tax gap attributable to small businesses are...
Conclusion
HMRC’s plans to tackle the part of the tax gap attributable to small businesses are made more difficult by the need to help those businesses survive the impact of the COVID-19 pandemic. HMRC estimates that 43% of the tax gap in 2018– 19 was attributable to small businesses (£13.4 billion). In response to COVID-19, HMRC paid out billions of pounds to support small businesses. In August 2020, HMRC published a document setting out how it will support taxpayers and the economy against the background of COVID-19. To support taxpayers, especially small businesses, and increase the efficiency of its compliance approach, HMRC is increasingly adopting a “one to many approach” in its compliance checks rather than the more traditional investigations of individual taxpayers. This may not provide the tailored support small businesses need through the pandemic and HMRC needs to adapt. The Committee is disappointed that, so long after the beginning of the pandemic, HMRC has still not made sufficient use of its data to identify small businesses which have been left out of previous support packages, and therefore maximise taxpayer eligibility for grant support. Recommendation: HMRC should write to us within one month of this report explaining how it plans to balance its efforts to tackle the tax gap in small businesses with the support that those businesses will need to survive the impact of COVID-19. Tackling the tax gap 9 1 HM Revenue & Customs’ tax gap estimates
Government Response
Not Addressed
HM Government
Not Addressed
6.1 The government agrees with the Committee’s recommendation. Re commendation Implemented 6.2 As requested, the department wrote to the Committee to this effect on 10 November 2020. The department recognises that COVID-19 is having a huge effect on small businesses, leaving a significant number in an extremely difficult position. The department committed to supporting viable businesses to cope with the impact of the pandemic, both by making it easy for them to receive key COVID-19 business support grants to which they are entitled and by administering the tax system in a way that takes account of their ability to meet their obligations to file their returns and pay their tax bills on time. The department have made general adaptations to tax administration and in addition have responded in a tailored way to individual businesses’ needs. 6.3 It remains essential that businesses comply with their tax obligations if they can, and that where a business is able to comply but fails to do so, the department takes the right action to secure the revenues that pay for essential public services and ensure a level playing field for those businesses that do meet their obligations. 6.4 In order to provide transparency and reassurance to small businesses, the department has published the approach to all of this in an HMRC issue briefing: COVID-19: how HMRC will continue to support customers and the economy.