Autumn Statement 2022 – Additional compliance funding leads to more Gamekeepers at HMRC

Research studies have showed that every £1 spent on investigations into the tax affairs of large businesses can yield up to an additional £56 in tax/NIC, while investigations into wealthy individuals can yield up to an additional £28 for every £1 spent. So, it could be assumed that whilst the Chancellor could have used the proposed £78M to provide much needed relief during the potential impending recession, he has taken the alternative route of speculating to accumulate, with the extra funding expected by the Government to bring in approximately £725m in additional taxes/NIC interest and potential penalties.

Tax investigations are a doorway to untold treasures: to quote “William Cowper”, and as long as investigations keep bringing in far more than they cost, we can expect to see HMRC continuing to increase resources in its tax compliance work.

Business owners and taxpayers should be aware that this continuing increased investment to close the “black hole” tax gap can only mean more compliance reviews and investigations, which by the law of averages means increased revenues for HMRC with potential prison sentences in the most extreme cases.

Our experiences and recent interactions with HMRC when supporting clients has seen increased HMRC activity in the following areas since the UK has emerged from Covid-19.

• CJRS claim reviews
• IR35 & employment status checks
• CIS compliance checks
• Employer compliance reviews
• R&D claim queries
• Indirect Tax and Customs reviews

What actions should I take?

There are many scenarios as to what next best actions should be taken, with the two main extreme options being.

• Option 1 “do nothing” or
• Option 2 “be pro-active”

The first option could be a risky choice where you are uncertain that all streams of tax which touch you personally or from a business perspective are all in order. HMRC may look to open up an investigation, particularly if they have not paid you in a visit over the last 3-5 years.

Speaking from the vast experiences drawn upon from the Mazars tax team, being pro-active in ensuring all of your tax related affairs are in order prior to any review or investigation from HMRC is a preferred position. Identifying any non-compliance or shortfall in tax/NIC due to HMRC, and subsequently voluntarily disclosing to HMRC can often mitigate penalties down to zero, as well as give HMRC comfort that your tax risks are governed carefully.

What next?

Tax has never had a higher profile following recent events in UK government and employee reward/remuneration is constantly in the spotlight, with tax regulations that are complex and subject to constant change. Non-compliance with legislation and exemptions could have a potentially significant financial impact on employers, but with detailed knowledge and our understanding of the rules the Tax team at Mazars can help support you in ensuring potential risks are managed, appropriate governance implemented, and opportunities are maximised.

Please do get in contact with a member of the Mazars’ Tax team or your local’ office contact should you wish to discuss further.

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Author: Ian Prescott, Employment Tax Manager