Extra funding for HMRC investigations recovered £45.7 billion in taxes for the year to September 2024, a £10bn increase from the previous year. However, with £10.1bn in VAT still underpaid by March 2024, much of it from large businesses, the tax gap continues to grow. Underpaid VAT rose by 20% from 2023 when it was £8.1bn.
An additional £1.4bn is being allocated to HMRC, with 5,000 compliance officers to be hired over five years. This is expected to recover an extra £2.7bn annually, roughly 7% of the tax gap. Yet, HMRC’s 8.3% staff turnover in 2023/24 and reliance on short-term contract workers may hinder progress. Fully training new officers takes 18 months, and some recent hires included temporary workers earning £250 a day.
HMRC currently employs 26,000 compliance officers across 11 teams, with its overall workforce dropping to 61,186 in 2023/24 from 62,174 the previous year.
The Large Business Directorate oversees just 2,000 companies, yet these account for 74% of underpaid VAT. HMRC attributes 72% of this to legal disputes over VAT rules, describing the behaviour of some businesses as “boundary-pushing”. While £5.8bn in VAT was recovered, only five companies voluntarily disclosed their interpretations of the VAT system last year.
With the tax gap nearing £40bn, VAT makes up 22.5% of unpaid taxes, highlighting the challenge for HMRC’s new hires.
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