VAT investigations on the rise

HM Revenue and Customs (HMRC) increased its scrutiny of VAT avoidance in 2022-23 according to recent reports, with tax investigations into mid-sized businesses on the rise.

The Financial Times has reported that the tax body opened up 23 per cent more VAT cases than in the previous year.

The number rose from 88,673 to almost 110,000 as HMRC stepped up its efforts to maximise tax revenues.

These new figures were revealed following a Freedom of Information (FOI) request from content and technology company Thomson Reuters. VAT makes up roughly 20 per cent of the UK’s total tax take.

The FOI response showed that in the past year HMRC focused primarily on wealthy individuals and mid-sized businesses, with the number of interventions targeting this group rising by 60 per cent – from 3,253 cases in 2021-22 to 5,203 in 2022-23.

The report compiled following the FOI information also showed that increased compliance measures had yielded £11.4bn in unpaid tax.

However, it revealed that the ‘tax gap’ between what HMRC estimated it is owed in VAT and what it collected was greater last year than the year before.

It stood at £8.8bn in the 2022-2023 tax year, up from £7.6bn in 2021-2022, bucking what had been a downward trend.

The Financial Times carried a statement from HMRC which said: “We have introduced legislation and enhanced requirements for online reporting and registration which are helping to reduce error, avoidance and evasion.

“We continue to work with customers, agents, trade and representative bodies to provide tax education and guidance, resulting in preventive measures which ensure tax is correctly accounted for without the need for further intervention.”

• To discuss any issues raised by this article, or any tax issues, please contact me on 01772 430000