Is your business prepared for increased HMRC scrutiny?

Recent figures show that HM Revenue & Customs (HMRC) recovered £45.7 billion in tax probes in 2024, a £10 billion increase from the previous year.

With 5,000 more compliance officers set to join HMRC over the next five years, businesses can expect more audits, investigations, and VAT compliance checks.

VAT is under the microscope, with an estimated £10.1 billion in unpaid VAT recorded in the last tax year alone – a 20 per cent rise from 2023.

HMRC attributes much of this to legal interpretation and boundary pushing by businesses, and it is making clear moves to close the tax gap, which is fast approaching £40 billion.

Should businesses be concerned by a more vigilant HMRC?

HMRC is actively increasing its workforce to target VAT errors, tax underpayments, and aggressive tax planning.

If your business has taken a risky approach to VAT mitigation, now is the time to review and reassess.

Large businesses are being challenged more frequently on VAT, with 72 per cent of unpaid VAT linked to legal interpretations.

Only five companies proactively disclosed their VAT positions to HMRC last year, meaning many others could face disputes and investigations.

Businesses found to be non-compliant could face penalties and interest charges, as well as reputational damage.

No company wants to be caught up in an HMRC investigation that could have been avoided.

How can businesses prepare?

If your business has relied on aggressive tax interpretations, ensure they are defensible and compliant with current HMRC guidance.

HMRC is increasingly requesting detailed documentation during compliance checks. Keeping thorough, well-organised tax records will help prevent issues and defend your position in case of an audit.

If you are unsure about a particular tax treatment, proactive disclosure to HMRC may help mitigate risks and potential penalties.

The message from HMRC is that businesses should expect greater scrutiny, more investigations, and tougher enforcement.

Get ahead of potential tax issues now by reviewing compliance measures and ensuring that your VAT practices are sound.

Get in touch with our tax specialists today to ensure your business is prepared for HMRC’s increasing focus on compliance.