HMRC ramp-up tax investigations – Is your business prepared?

HM Revenue & Customs (HMRC) is cracking down on unpaid tax, and businesses are firmly in the firing line.  

Last year alone, the tax authority recouped a massive £45.7 billion through investigations, a sharp £10 billion increase from the previous year.  

Over the next five years, HMRC plans to bring in 5,000 extra compliance officers, ramping up audits, VAT reviews, and tax probes across the board.  

One area facing intense scrutiny? VAT.  

An estimated £10.1 billion in unpaid VAT was identified in the last tax year, a worrying 20 per cent increase compared to 2023. 

The Government sees this as a major problem, blaming businesses for exploiting legal grey areas to reduce their tax bills.  

With the UK’s tax gap edging towards £40 billion, HMRC is under pressure to claw back every penny it can. 

A wake-up call for businesses 

VAT is fast becoming a battleground. Large businesses are already in the spotlight, with HMRC challenging 72 per cent of disputed VAT on legal interpretation grounds.  

Despite this, only a handful of businesses have taken the initiative to disclose their tax positions before being investigated. 

For companies that have pushed the limits of VAT mitigation, the risks are growing.  

Tax disputes can trigger lengthy investigations, reputational damage, and additional scrutiny for years to come.  

Steps to protect your business 

With HMRC intensifying its focus, businesses need to get their tax affairs in order before an investigation lands on their doorstep. Key steps include: 

• Reassessing VAT strategies – If you have taken an aggressive tax position, ensure it is fully justifiable under current legislation. 

• Strengthening record-keeping – HMRC’s compliance checks are becoming more detailed, and poor documentation can lead to costly disputes. 

• Proactively engaging with HMRC – If there is any uncertainty over VAT treatment, voluntary disclosure could help minimise penalties and avoid unwanted scrutiny. 

HMRC is watching, and tax compliance is not something businesses can afford to overlook.  

Getting ahead of potential issues now could mean the difference between a routine check and a full-blown investigation. 

If you want to stay ahead of the curve, our tax specialists can help. Contact us today to ensure your business is fully prepared.