The UK Chancellor of the Exchequer, Rachel Reeves, has promised an increased crackdown on tax evasion.
In her Spring Statement she said it was not fair that working people are paying their taxes, but there are others avoiding doing so!
Reeves explained that the Treasury has set out plans that will “increase the number of tax fraudsters charged each year by 20%.”
The Office of Budget Responsibility confirmed these changes will take revenue raised from reducing tax evasion to £7.5 billion.
The plan is to prosecute more tax fraudsters by expanding HMRC’s counter-fraud capacity, increasing the number of annual charging decisions from 500 to 600 a year. Additional criminal investigations will focus on delivering a strong deterrent. This will include tackling those who undermine legitimate trade and small business, fraud committed by the wealthy, fraud facilitated by those in large corporations, and by individuals and companies who make it possible for others to hide money offshore. Investigations will also address organised criminal attacks, focusing on illicit finance and complex money laundering schemes.
A new HMRC reward scheme for informants is also being launched later this year, targeting serious non-compliance in large corporates, wealthy individuals, offshore and avoidance schemes. The new scheme will take inspiration from the successful US and Canadian models, rewarding informants with compensation linked to a percentage of any tax taken because of their actions.
HMRC, Companies House, and the Insolvency Service are delivering a joint plan to tackle those using contrived insolvencies to evade tax and write off debts owed to others. This includes increasing the use of upfront payment demands, making more directors personally liable for company taxes, and increasing the number of enforcement sanctions to double the amount of tax protected to £250 million by 2026-27.
As part of the changes HMRC is overhauling its approach to offshore tax non-compliance by the wealthy, recruiting experts in private sector wealth management and deploying AI and advanced analytics to help identify and challenge those who try to hide their wealth, wherever they try to hide it. During the next five years, the government will increase HMRC’s resource assigned to tackling wealthy offshore non-compliance by around 400 people, who are estimated to bring in over £500 million over the forecast period.
The government confirmed the continued rollout of Making Tax Digital (MTD) for income tax Self Assessment (ITSA), with sole traders and landlords with qualifying income over £20,000 joining from April 2028.
The Spring Statement said MTD places UK businesses on a digital footing, prepares them for the future, gives them the tools they need to succeed in an increasingly competitive landscape, and ensures they can benefit from a modern, digital service when managing their tax affairs. The government will continue to explore how it can best bring the benefits of digitalisation to more of the around four million taxpayers who have income below the £20,000 threshold.
Finally, the government has published four consultations today on:
• How HMRC can make better use of third-party data to increase automation and close the tax gap.
• Proposals to strengthen HMRC’s ability to take action against those tax advisers who facilitate non-compliance from their clients.
• A comprehensive package of measures to close in on promoters of marketed tax avoidance, whose contrived schemes leave their clients with unexpected tax bills.
• Options to simplify and strengthen HMRC’s inaccuracy and failure to notify penalties.
Away from tax, Reeves promised to meet the 2% inflation target by 2027, and provide an additional £2.2bn in spending for defence.
Capital spending was also increasing by an average of £2bn a year.
However, the growth forecast for the coming year was halved from 2% to 1%.
