HMRC to Recruit 5,000 New Tax Inspectors in Major Crackdown on Small Businesses.
HMRC’s plan to recruit 5,000 new tax inspectors marks one of the department’s largest expansions in recent years, signalling a heightened focus on tackling the UK’s growing tax gap. This initiative is part of a broader effort to recover billions of pounds in unpaid taxes, with an emphasis on small businesses.
This recruitment drive will bring HMRC’s compliance staff to an estimated 37,000 by 2025, reflecting the government’s commitment to stricter enforcement.
The department has shifted its focus from high-profile offshore tax evasion cases to targeting smaller entities and their directors, whose collective underpayments have apparently grown significantly. While the plan aims to recover £6.5 billion in revenue by 2029/30, it has sparked concerns among small business owners, who fear increased audits, delays, and penalties.
Apparently small businesses now account for 60% of the total tax gap, a significant increase from 44% in 2018–19. HMRC attributes this growing gap to widespread errors and misreporting among smaller enterprises, particularly in areas such as business expenses and VAT returns. With rising costs, including the National Living Wage and National Insurance contributions, many small businesses are struggling to keep pace with tax compliance requirements.
The department has outlined several common issues that inspectors will focus on during investigations:
- Improper expense claims: Personal purchases such as suits, leisure travel, and unusual items like hovercrafts are often claimed incorrectly.
- VAT errors: Misreported VAT on invoices or under-declared sales.
- Undeclared income: Failure to declare all sources of revenue, particularly for cash-based businesses.
This intensified focus on small businesses raises important questions about fairness. While these enterprises are often seen as easier targets for enforcement due to their limited resources, critics argue that the government is neglecting larger systemic issues in the tax system.