Source · Select Committees · Public Accounts Committee
Recommendation 9
9
Accepted
Companies House and HMRC lack understanding of company register fraud's link to tax losses.
Recommendation
Companies House said that, prior to the introduction of the Economic Crime and Corporate Transparency Act (ECCTA), it estimated that 5% of UK registered companies were fraudulent. It explained that external commentators had estimated the figure could be as high as 20%, and that the true value likely lies somewhere in between.19 HMRC told us that individuals getting on the company register who should not be there, or with the incorrect classification, creates a tax risk.20 In its Strategic Intelligence Assessment, published October 2024, Companies House states that UK limited companies are used in VAT fraud.21 Companies House said it did not know how fraud on the company register translates into tax losses, and HMRC said that its estimate of the tax gap does not tie back to registrations in Companies House.22 HMRC’s strategic approach
Government Response Summary
HMRC, Companies House, and Insolvency Service will establish a framework for sharing threat assessments, data and intelligence to improve collective understanding of risks, corporate fraud and any tax gap implications, laying out plans by September 2025 and completing an assessment of potential impacts on the tax gap by September 2026.
Government Response
Accepted
HM Government
Accepted
1b. PAC recommendation: HMRC should ensure it works with Companies House and the Insolvency Service to understand how the amount of corporate fraud affects the tax gap. It should lay out how it plans to do this in its Treasury Minute Response to the Committee. 1.6 The government agrees with the Committee’s recommendation. Target implementation date: September 2026 1.7 HMRC, Companies House, and Insolvency Service are committed to preventing fraud and tax evasion by identifying and holding accountable corporate entities that attempt to evade their responsibilities and tax liabilities. 1.8 HMRC, Companies House and Insolvency Service will establish a framework for sharing threat assessments, data and intelligence across all three departments with the aim to improve collective understanding of the risks, amount of corporate fraud and any tax gap implications. HMRC anticipate that the increased sharing of data and intelligence will positively improve our ability to assess corporate fraud within the tax gap. HMRC will lay out its plans by September 2025 and complete an assessment of any potential impacts on the tax gap by September 2026.