9th Report - Tax evasion in the retail sector

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 … Read more 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 Show less

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At Autumn Budget 2024, the government announced that it was increasing collaboration between HMRC, Companies House and the Insolvency Service to tackle phoenixism.40 The Insolvency Service told us that, since the publication of the National Audit Office’s report, it had … Read more At Autumn Budget 2024, the government announced that it was increasing collaboration between HMRC, Companies House and the Insolvency Service to tackle phoenixism.40 The Insolvency Service told us that, since the publication of the National Audit Office’s report, it had started an action group alongside Companies House and HMRC to look at phoenixism.41 All three organisations said that they were committed to increasing collaboration between them to tackle phoenixism and HMRC told us the organisations would be developing a concrete plan over the remainder of the financial year. The organisations cited a range of benefits of increased collaboration including exploiting data sharing to aid early intervention and maximise opportunities to recover taxes due before insolvency.42 Show less

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HMRC and Companies House have explored opportunities from Companies House’s new powers, including a single streamlined system for registering and filing company, Corporation Tax and VAT documentation which would provide more assurance over the addresses of registered businesses. HMRC and … Read more HMRC and Companies House have explored opportunities from Companies House’s new powers, including a single streamlined system for registering and filing company, Corporation Tax and VAT documentation which would provide more assurance over the addresses of registered businesses. HMRC and Companies House estimated in early 2024 that closer integration of systems would take between five and 10 years to implement.43 HMRC and Companies House told us they are regularly meeting about this programme, but it will require significant investment and there are issues which need to be resolved first, including different definitions in their regimes and differences in filing dates.44 Both departments acknowledged that delivering 36 C&AG’s Report, para 2.8 37 Qq 56, 72 38 Q 71 39 Q 43 40 Autumn Budget 2024 – HC 295 41 Q 81 42 Q 94 43 C&AG’s Report, para 2.22 44 Q47 12 a joint service offers a significant prize.45 Companies House also explained that its shopping list was full delivering the reforms that ECCTA has already made possible, and it would need to deliver these first before a joint registration service.46 HMRC told us it was working with Companies House to bid for more investment at Spending Review to introduce a joint registration service.47 45 Qq 47–48 46 Q 47 47 Q 93 13 2 Preventing and responding to tax evasion Reforms to the role of Companies House Show less

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HMRC does not have a specific strategy for addressing tax evasion.23 In 2019 HMRC set its latest strategy to tackle tax non–compliance, which is built of three strands: promoting compliance through education and support; preventing non–compliance by improving policies and systems; and responding when non–compliance occurs.24 HMRC’s overall compliance strategy …

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HMRC told us it has some separate and specific strategic approaches to particular types of non–compliance, such as serious fraud and illicit tobacco, but not for tax evasion.26 It told us that evasion is just one element of the tax gap and it wants to tackle all elements of it, …

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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 …

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Until April 2024, Companies House had limited powers to check the validity of information provided to it by registered companies. It also had limited enforcement and intelligence–gathering powers, and limited scope to share data with other public bodies. The lack of checks meant it was easy for fraudsters to set …

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Some measures introduced under ECCTA will not be fully operational until Companies House develops the necessary systems and capability, or until further secondary legislation is in place. This includes verifying directors’ identities.53 Companies House told us identity verification will be introduced on a voluntary basis from spring 2025 and become …

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The identity checks that Companies House is now responsible for are not intended to verify the address or place of business.57 Companies House told us that address verification, which it says would be an additional burden on businesses, is not part of ECCTA. It said there was a balance between …

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