Tax take plunged by £9bn through the pandemic, NAO finds
The amount of cash the taxman brought in during the pandemic plunged by £9bn due to a rise in dodging and non-compliance, according to official figures released today.
The fall in tax-take comes after HM Revenues & Customs shifted hordes of staff into Covid support schemes, cutting its ability to investigate and chase up unpaid taxes, the report from the National Audit Office found.
Some 12 per cent of workers – or 1,350 – were passes on the support schemes through 2020-2021, with HMRC saying it paused a lot of inquiries into suspected non-compliance, other than those potential fraud or criminal activity. The watchdog closed 29 per cent fewer cases than in the previous year.
Lawyers at Pinsent Mason said the pandemic had presented a “huge challenge” to its tax investigation teams.
“For quite a lengthy period HMRC had to stop in person visits and raids on premises,” Peter Morley, partner at the firm said.
“A lot of the bigger tax investigations are very complex and can take many months in the planning so its not surprising that Covid disruption caused a big hit to compliance take.
“Even more significant than the physical challenges of operating under Covid was that HMRC, at almost no notice had to administer the furlough and Eat Out to Help Out schemes, taking vital resources away from compliance activity.”
The chancellor revealed in the Autumn statement that the government would roll out new measures to tackle tax avoidance, evasion, and wider non-compliance.
Ministers reckon the fresh rules will raise an estimated £1.7bn over the next 5 years, but Pinsent Mason said the gaps in tax take suggest that “more needs to be done”.