Recommendation 14

HMRC explained to us that its overall approach to ensuring taxpayers’ compliance with the tax laws is predicated on promoting voluntary compliance through promoting trust in the tax system and supporting taxpayers that want to comply. It aims to deter those that may not want to comply by highlighting the risk of their detection and subjecting them 26 C&AG’s Report, para 9 27 Q 1 28 Qq 22, 61 29 Qq 1–2 30 Qq 3, 47, 51 31 Qq 52–53; HMRC quarterly performance report: April to June 2020, available at: www.gov.uk/government/ publications/hmrc-quarterly-performance-report-april-to-june-2020 32 Qq 10–13 14 Tackling the tax gap to investigations and financial sanctions for non-compliance.33 The COVID-19 pandemic, by increasing fragility across the economy and in the financial affairs of taxpayers, has compelled HMRC to reconsider its processes for administering the tax system. HMRC told us that the assumptions that underpin its one-size-fits-all processes, namely that the vast majority of taxpayers can comply with their obligations and have the capability to do that, with a few exceptions that will need to be pursued for their non-compliance, may no longer hold true. For example, it has recently started issuing some penalties for people not filing tax returns because there has been a drop in the number filed by the taxpayers.34 Making Tax Digital