Source · Select Committees · Public Accounts Committee
Recommendation 19
19
We asked HMRC whether it is doing enough to tackle small businesses that operate in...
Conclusion
We asked HMRC whether it is doing enough to tackle small businesses that operate in the hidden economy and deliberately evade their responsibilities. HMRC told us that about 8,000 of its staff concentrate on ensuring compliance in the small business sector, including those businesses active in the hidden economy. It explained that the large number of small businesses and the fast changes in the make-up of the sector compromise the effectiveness of HMRC’s one-to-one enforcement actions in deterring small businesses from non-compliance. The Department told us that, from a strategic point of view, to reduce the tax gap HMRC has to consider making more use of third-party data to enable it to identify incorrect filings, and introduce more third-party withholding, as in the case of pay-as-you-earn income tax.46
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.