Conclusion 6

We welcome HMRC’s new goal to reduce the tax gap but we are concerned that it still plans to reduce the number of prosecutions. HMRC expects to bring in £6.5 billion additional tax revenue by 2029–30 as a result of measures set out at the Autumn Budget 2024, and has funding for 5,000 additional compliance officers. However, it could not tell us how much this will reduce the tax gap. HMRC has published experimental statistics on the offshore tax gap, but admits this is not a complete measure. At £0.3 billion we are concerned HMRC’s estimate looks implausibly low and that there is no way of making an accurate estimate. We are also concerned that HMRC is not doing enough to tackle deliberate cases of non-compliance. HMRC can use civil processes to sanction non-compliance, but its use of criminal investigation and prosecution is decreasing, and there were only 344 criminal prosecutions in 2023–24, compared with 691 in 2019–20, with HMRC focusing on the most serious and high-value cases. We are concerned that HMRC is not using the criminal enforcement tools at its disposal. There have never been any prosecutions under the criminal facilitation of tax evasion offence. The number of HMRC investigations into serious tax fraud and avoidance has fallen to a six-year low. HMRC is examining the deterrent effect of criminal investigations and prosecutions to understand their effectiveness in recovering tax. recommendation Now that HMRC has been tasked with reducing rather than just maintaining the tax gap, it must be bolder in identifying and tackling abuse. HMRC should: a. set ambitious targets for compliance yield that would allow it to achieve annual reductions in the tax gap; b. obtain an estimate that is as accurate as feasibly and practically possible of the offshore tax gap and develop a standalone strategy to reduce it; and c. research which interventions are most effective in achieving a deterrent effect for tax evaders and organised criminals. This research should expl