A new Freedom of Information (FOI) request from accountancy firm UHY Hacker Young has revealed that 47 per cent of HMRC investigations into small business and individual compliance in the 2020-21 tax year returned no money. By contrast, in the previous financial year, 2019-2020, just 31 per cent of investigations into individuals and small firms yielded no returns.
According to HMRC, the increase was attributable to the impact of the COVID-19 pandemic, which it said had caused an unprecedented shock to the economy. During the 2020-21 tax year, HMRC closed 203,000 compliance investigations, generating £3.47 billion in total. However, no money was yielded from close to half of these investigations, with 96,000 generating no returns.
UHY Hacker Young partner Graham Boar asserted that too many HMRC investigations were not generating results. Boar commented: “Taxpayers need reassurance that there is a valid reason for an investigation to be opened into their affairs and that time and stress isn’t wasted on cases that will yield no results.”
A spokesperson for HMRC said in response: “Decisions on when and where to intervene are not driven solely by the amount of money that it may recover, we also consider the broader impact our interventions will have on compliance in the tax system as a whole.”
“It’s important for taxpayers to know we cover all parts of the economy impartially, so they can be confident they aren’t being disadvantaged. Some of our interventions, such as educational visits, don’t aim to bring in yield. If our compliance check shows there is nothing wrong, we’ll bring it quickly to an end.”
As reported by the Financial Times, several of HMRC’s most recent investigations have involved high-profile celebrities being targeted under IR35 off-payroll working rules. Broadcasters Adrian Chiles and Lorraine Kelly have been among those to win IR35 cases against HMRC, while a case against Match of the Day presenter Gary Lineker remains ongoing.
