Rachel Reeves’ won’t raise an additional £6.5 billion a year by 2029/30 tax avoidance clampdown

Fiona Fernie, Partner said:

Despite the Chancellor’s suggestion that she is going to raise £6.5 billion in additional tax revenue per year using measures to ‘close the tax gap’, it is difficult to see how this is going to be achieved.

The provisions set out show that only 200 additional HMRC compliance staff are due to start training in November this year and the training will inevitably take several months. In addition, the quality of HMRC staff appears to have declined in recent years, so there is arguably a need to improve the quality of the training they receive to the superb levels in past generations.

Furthermore, recent experience suggests that HMRC are not particularly adept at modernising their IT and data systems (MTD being a good example, but there are others, such as the dreadful online forms for making a disclosure of unreported tax liabilities).

She adds:

Her emphasis on promoters is also not necessarily appropriate. There have been a number of initiatives trying to clamp down on promoters with HMRC having been handed significant powers to pursue them but the tendency for promoters to ‘shape shift’ and/or move offshore makes them notoriously difficult to pin down.

On the other hand, HMRC’s published figures suggest that 60% of the current tax gap is attributable to small domestic businesses (i.e those who avoid a number of taxes such as Corporation Tax, VAT and PAYE by receiving and paying cash in hand). Ms Reeves has not provided any detailed plan as to how she might clamp down on these individuals. An additional number of HMRC compliance officers all of whom will need to start from basic training is not likely to scratch the surface of the tax liabilities owed by that community.

Ms Reeves also referred to ‘designing out opportunities for non-compliance’. While this is a noble aim, she needs to ensure that taxpayers get the appropriate help to be compliant, which includes not only keeping the telephone helplines open, but manning them with adequately trained staff.

All these issues suggest that the Chancellor’s figure of £6.5 billion is over ambitious, particularly in view of the fact that most of the major drives to collect additional tax revenues in the last 15 years have not yielded the predicted amounts.

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