Source · Select Committees · Public Accounts Committee
Recommendation 12
12
Acknowledged
Government investment enables HMRC to reduce the overall tax gap, including evasion.
Conclusion
Previously HMRC had an overall aim to stop the tax gap increasing.29 HMRC told us that it now wants to reduce the tax gap.30 At Autumn Budget 2024, the government increased HMRC’s settlement for 2025–26 by 4.5% in real terms and announced it was investing £1.4 billion over five years for HMRC to recruit 5,000 additional compliance staff.31 HMRC told us this investment will allow it to bear down on the tax gap, including tax evasion.32
Government Response Summary
The government agrees with the committee's recommendation and states that HMRC wants to reduce the tax gap and highlights investments to increase compliance staff.
Government Response
Acknowledged
HM Government
Acknowledged
2.1 The government agrees with the Committee’s recommendation. Target implementation date: Autumn 2025 2.2 HMRC has set out below the department’s aims for tackling deliberate non-compliance and evasion. 2.3 Deliberate non-compliance and evasion covers a range of activity including deliberately submitting false tax returns, falsely claiming repayments or reliefs, hiding income, gains or wealth offshore, and smuggling taxable goods. 2.4 HMRC’s strategic approach to managing all compliance risks is preventing non- compliance from occurring, promoting good compliance by educating and supporting customers in their tax affairs, and responding to non-compliance. 2.5 Closing the tax gap is one of three ministerial priorities for HMRC, and in the last Budget, the government announced an ambitious package to close the tax gap, raising £6.5 billion in additional tax revenue per year by 2029-30. HMRC is committed to achieving an effective control environment which reduces rates of error, evasion and fraud but does not set specific targets for the different non-compliance behaviours or specific sectors. HMRC’s approach to this in respect of evasion is described in the response to recommendation 2b. 2.6 The government is increasing HMRC’s budget by £762 million for 2025-26 to boost compliance and customer service capacity. This includes investing in HMRC IT systems, making better use of data and raising the standards of tax practitioners, as well as continuing the recruitment of an additional 5,000 compliance staff. At Spring Statement 2025, the government also announced £100 million in new funding for HMRC to recruit a further 500 compliance officers from April 2025. When Phase 2 of the Spending Review is confirmed later this year, HMRC will be able to provide more certainty on its 5-year plans.