Source · Select Committees · Public Accounts Committee
Recommendation 13
13
Acknowledged
HMRC lacks specific objectives or targets for tackling tax evasion rates.
Recommendation
HMRC does not have a specific focus on, or explicit objective for, its performance in tackling tax evasion.33 HMRC explained that it is driven by an overall compliance yield target which is designed to close the overall tax gap, but did not tell us whether it has a specific target to reduce the evasion tax gap.34 We asked HMRC how much tax evasion it is willing to tolerate. HMRC told us that it does not have a level of tolerance, and no tax evasion or non–compliance is acceptable to it. However, HMRC explained that it is inevitable that there will always be some level of non–compliance.35 26 Q 15 27 Q 17 28 Q 18 29 C&AG’s Report, para 9 30 Q 20 31 Autumn Budget 2024 – HC 295 32 Q 20 33 C&AG’s Report, para 9 34 Q 16 35 Q 20 11 Joint working across government
Government Response Summary
HMRC will increase its budget by £762 million for 2025-26 to boost compliance and customer service capacity, including investing in IT systems, data and tax practitioners.
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.