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HMRC Investigations are down

Author: Niall Hearty  28 February 2024
2 min read

Niall Hearty of Rahman Ravelli considers the latest statistics regarding HM Revenue and Customs investigations.

The past five years has seen a drop of almost a half in the number of civil tax avoidance leads being looked into by HM Revenue and Customs’ (HMRC’s) Fraud Investigation Service. In the same period, the number of civil cases it has formally opened has fallen by more than a quarter.

The statistics were obtained by the Bureau of Investigative Journalism (TBIJ) under Freedom of Information laws. They come five months after it was revealed that prosecutions following HMRC investigations had dropped by two thirds in five years.

For some commentators, the figures show that the tax authority is not making enough use of its civil and criminal enforcement powers.

In the financial year of 2018-19, HMRC’s Fraud Investigation Service opened 37,273 preliminary inquiries into suspected tax errors or false declarations. By 2022-23, that annual figure was down to 21,338 – a 43% reduction. The number of civil cases formally opened decreased by 28% in the same period, from 17,424 to 12,585.

HMRC’s enforcement activities were reduced sharply in 2020, as a result of the Covid-19 pandemic. But the agency’s case numbers have still not returned to pre-pandemic levels.

HMRC has said the figures do not take into account all of its compliance activity and has emphasised the £136 billion it has recouped from compliance interventions since 2018-19. Last year, the Public Accounts Committee found that for every £1 spent on compliance, HMRC recovers £18 in additional tax revenue.

But the number of cases opened regarding offshore, corporate and wealthy taxpayers has fallen by 56% in five years.

Resources

With tax avoidance costing the UK £1.4 billion a year and tax evasion totalling £5.5 billion a year, it could be said that HMRC is not putting enough resources into tackling this problem, whether that be through criminal or civil action. That is despite its increased rhetoric over the past few years regarding the efforts it has made to curb such behaviour.

Unfortunately, that rhetoric does not appear to have been followed by action. Even allowing for the COVID-19 pandemic period, this drop in investigations appears to come down to a straightforward lack of resources within the agency. The agency has pointed out that these figures “do not take account of our overall compliance activity” - and there is an argument to be made that the UK tax code system is complex. But nevertheless, the issue of resources appears to be at the heart of the problem.

It is also worth emphasising that these figures will certainly not act as a deterrent to those who may be inclined to either promote or take part in aggressive tax avoidance and evasion. Any rhetoric will have only limited effect as a deterrent if it is not backed with prosecutions.

If this decline is to be halted, there needs to be Increased investment in additional technology and officers to speed up investigations. Such a fiscal injection is likely to see HMRC gaining a better return on its investment. 

Niall Hearty C 07998

Niall Hearty

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Niall has a wealth of corporate crime expertise and an ability to coordinate global bribery and corruption cases. His achievements in such investigations have made him a logical choice for corporate clients.

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