The government has announced a comprehensive package of measures aimed at closing the tax gap and generating over £1 billion in additional gross tax revenue annually by 2029-30.
Key highlights include:
Tax Debt
As of December 2024, tax debt owed to HMRC exceeded £44 billion, with approximately £20 billion being over 12 months old. The government will invest £87 million over the next five years with HMRC’s existing partnerships with private sector debt collection agencies to enhance debt recovery efforts. In addition to this they will re-start ‘direct recovery’ from individuals and companies that can pay but choose not to, and are exploring options for automatic collection of lower debts.
Recruitment
Building on the 2024 budget announcement of 5,000 new compliance staff, there will be an additional 500 compliance staff, 600 HMRC debt management staff, and 400 private sector wealth management experts, who will be recruited to address offshore tax non-compliance, particularly among the wealthy who attempt to conceal their assets.
Making Tax Digital (MTD) Late Payment Penalties
To incentivise timely tax payments, late payment penalties will increase from April 2025 for VAT and ITSA taxpayers joining MTD. Penalties will be 3% of tax overdue by 15 days, 3% of tax overdue by 30 days, and 10% per annum for tax overdue by 31 days or more.
Stronger Action Against Egregious Behaviour
Counter fraud efforts will see a 20% increase in prosecutions annually, rising to 600 cases. Criminal investigations will serve as a strong deterrent against those undermining legitimate trade and small businesses. COP9 investigations are here to stay, reinforcing HMRC’s use of the most serious civil investigation powers.
Rewards for Informants
A new scheme, inspired by successful models in the US and Canada, will be launched later this year to reward informants.
Phoenixism
HMRC, Companies House, and the Insolvency Service will collaborate to address contrived insolvencies that write off tax and other debts. Measures will include upfront payment demands and holding directors personally liable for company tax liabilities.
Consultations
The government has initiated four consultations on the better use of third-party data (financial services providers), tax advisers facilitating non-compliance, promoters of marketed tax avoidance, and the simplification and strengthening of inaccuracy and failure to notify penalties (reform of behavioural penalties). Updates will be provided as these consultations progress.
Conclusion
From the announcements made, debt recovery is the priority. If you have unpaid HMRC debts, take action now. With additional resource and automation of debt recovery on it’s way, it is crucial to address outstanding liabilities. As announced in the 2024 Budget, HMRC will raise interest charges by an additional 1.5%, totalling 4% above the Bank of England base rate, from April 2025 making outstanding liabilities more costly.
HMRC remains focused on offshore non-compliance, and COP9 investigations are here to stay.
If you have matters requiring disclosure to HMRC, be proactive and seek professional advice. Contacting HMRC before they reach out to you will reduce penalty charges.
At HaysMac, we have extensive experience dealing with HMRC enquiries and disputes. Our practical approach and insight into HMRC’s working practices will guide you through the process from start to finish.
To discuss any of these matters, please contact your usual HaysMac representative or Danielle Ford, Partner and Head of Tax Disputes and Resolutions.
