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In a recent speech, Chancellor of the Exchequer, Rachel Reeves, emphasised the urgent measures needed to address a significant £22 billion deficit in the public finances. As part of these measures, HMRC is set to receive substantial investments aimed at enhancing its ability to combat tax non-compliance, including both fraud and tax avoidance.
The Chancellor announced that HMRC will be hiring additional compliance officers and receiving enhanced resources to tackle tax evasion more effectively. This initiative is part of a broader strategy to ensure that everyone pays their fair share of taxes, with the government committed to making legislative changes to support these efforts.
In her speech, Reeves highlighted the importance of this crackdown on tax avoidance, which is expected to generate an additional £5 billion annually by the end of the decade. Although specific spending figures were not disclosed in the recent audit, Labour had previously indicated an annual investment of £555 million in HMRC, aimed at increasing the number of compliance officers by up to 5,000.
The Treasury’s public spending audit document reinforced the government's commitment: “The government is committed to tackling tax non-compliance, including from fraud and tax avoidance, to ensure everyone pays their fair share. The government will increase HMRC’s compliance staff, invest in HMRC’s resources and technology infrastructure, and make legislative changes to tackle tax non-compliance and raise revenue.”
Seb Maley, CEO of tax compliance firm Qdos, noted the gravity of the Chancellor’s speech. "The Chancellor’s speech has set an ominous tone. The public purse is apparently in worse wear than previously thought. Now you can’t help but think that the scene has been set for tax rises," Maley said.
For the self-employed, the government's focus on tax non-compliance is particularly notable. The additional resources and legislative changes suggest a significant increase in HMRC's compliance activities under the Labour government. Maley added, "On one hand, if by legislative changes the government decides to tackle promoters of tax avoidance schemes – like the disguised remuneration schemes that have plagued the umbrella industry – that would be widely welcomed. On the other, granting HMRC more powers to fight non-compliance could present a threat to many taxpayers – if recent years are anything to go by. All too often, we’ve seen innocent freelancers and contractors caught up in long, drawn-out and costly tax investigations. While it’s right that everyone pays their fair share, the mistreatment of innocent taxpayers simply has to stop."
The Chancellor’s upcoming Autumn Budget, scheduled for October 30, is expected to provide further details on these initiatives. While the Labour Party has pledged not to increase income tax, national insurance, or VAT, the current economic challenges may necessitate difficult decisions to stabilise the economy.
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