HMRC’s latest annual report reveals a mixed bag of results,
highlighting both achievements and ongoing challenges in tax collection.
Here’s a breakdown of the key points you need to know.
The Growing Tax Gap
Tax Gap Amount: The tax gap has grown to a staggering £39.8 billion.
Percentage Change: Although the tax gap as a percentage of total tax due has slightly decreased
from 5.2% to 4.8%, the absolute amount has increased.
Small Business Impact: Small businesses now make up 60% of the tax gap,
a significant rise from 37% in 2017-18.
Compliance Yield: HMRC’s Big Win
Revenue from Compliance: HMRC’s compliance activities brought in an impressive
£41.8 billion in additional revenue for 2023-24.
Year-on-Year Growth: This figure represents a 23% increase from the previous
year, surpassing HMRC’s target of £40.5 billion.
Revenue Share: The compliance yield accounts for 5.0% of the total revenue collected.
Strategic Shifts in HMRC’s Approach
Focus on Prevention: There’s a noticeable shift towards “upstream” compliance work,
which aims to prevent non-compliance before it occurs.
Future Scrutiny: With the growing focus on small businesses, accountants should prepare for increased scrutiny. Emphasising robust record-keeping and accurate tax filings will be crucial.
What This Means for Small Businesses and Accountants
Increased Attention: Small businesses are likely to face more attention from HMRC
due to their significant contribution to the tax gap.
Proactive Measures: Accountants should help clients establish strong tax governance frameworks
and internal controls to minimise the risk of non-compliance.
Prepare for Change: As HMRC continues to refine its approach, staying updated on compliance requirements and best practices will be essential for both businesses and their advisors.
This latest report from HMRC highlights the ongoing challenges in tax collection, especially among
small businesses and underscores the importance of proactive compliance strategies.
Whether you’re a small business owner or an accountant, staying ahead of these changes
is key to navigating the evolving landscape of tax compliance.
Trust the Guild – where compliance isn’t just a promise, it’s a guarantee.
Choose The Guild and secure your peace of mind.
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