Total extra tax collected through tax investigations rose by 15% to a record £48bn, up from £41bn the previous year. The yield from corporation tax investigations increased dramatically to £6.15bn, nearly doubling from £3.19bn. HMRC has ambitious targets to boost investigations and compliance efforts. Increased scrutiny is expected for individuals and companies as the Government seeks to raise tax revenues without increasing rates. HMRC is employing sophisticated tactics, such as digital prompts and Customer Compliance Managers, to enhance yield and compliance effectiveness.
This is a dramatic increase in yield from tax investigations, with the biggest uptick being in what HMRC describe as "upstream operational yield", being what they consider to have been protected from non-compliance before it occurs.
When HMRC opens an investigation into one area of a corporate's tax affairs it often spreads to aspects of their tax position, including PAYE and VAT.
With the Government wanting to raise tax revenues but politically constrained from hiking headline tax rates, ramping up compliance activity is one of the few levers left. Individuals and Companies are likely to face even greater scrutiny in the next 12 months.
To keep delivering increases, HMRC will have to continue to increase its number of investigations/active focus areas or increase the amount it is able to gather from each investigation.
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