In a noteworthy surge, HMRC’s VAT investigations witnessed a 23% increase last year, as the tax authority launched a robust campaign with 104,900 probes targeting unpaid VAT. The intensified efforts, particularly focused on mid-sized businesses, resulted in the recovery of an additional £11.4 billion in unpaid taxes, underscoring the impact of HMRC’s vigilant approach to VAT compliance.
Maximising Tax Revenues with HMRC’s VAT Investigations
As part of its commitment to maximising tax revenues, HMRC significantly increased its compliance drive, deploying over 3,000 additional staff since 2021/22 within its customer compliance units. The focal point of these efforts has been HMRC’s VAT investigations, which surged by 23% last year.
This substantial rise in active cases allowed HMRC to uncover potential instances of unpaid VAT and contribute to the recovery of £11.4 billion through compliance probes.
Sectoral Impact of HMRC’s VAT Investigations
The impact of HMRC’s VAT investigations extended across various sectors, with mid-sized businesses and the wealthy facing heightened scrutiny. Investigations into large businesses yielded a substantial £5 billion in recovered revenue, emphasising the significance of VAT receipts.
Constituting approximately 20% of HMRC’s total tax revenue, VAT receipts play a crucial role in the overall tax landscape. The surge in HMRC’s VAT investigations underscores the importance of addressing potential discrepancies in VAT payments to ensure a fair and efficient tax system.
The Complexity of VAT Compliance and Global Trends
VAT is a complex tax with varying rates and liabilities across different tax jurisdictions. HMRC’s intensive focus on VAT compliance reflects global trends, as tax authorities worldwide are increasingly scrutinising VAT underpayments. Over 80 national governments mandate the use of e-invoicing or continuous transaction control requirements for VAT and other sales taxes, enabling tax authorities to identify potential underpayments more efficiently.
The surge in HMRC’s VAT investigations is part of a broader international effort to ensure tax compliance in the digital economy. UK businesses trading in the EU are set to comply with e-invoicing rules from 2024, aligning with the global trend to enhance transparency and accountability in tax transactions.
