HMRC has boosted its staff numbers in response to a decline in tax revenue, according to a report in This Is Money. In just one year, over 3,000 people have joined the compliance division. This is a 12% jump in staffing levels, a significant move indicating that the tax office is gearing up to ensure everyone is paying their fair share.
Why the Sudden Increase?
In the financial year of 2021/22, there was a notable drop in tax revenue from HMRC’s compliance work. The drop from 5.2% (pre-pandemic levels) to 4.2% means the tax office lost out on £9 billion over two years. One major reason for this? The fraudulent use of Covid schemes.
Additionally, issues like social distancing and the loss of veteran staff hampered the productivity of the existing compliance teams. Now, it appears HMRC is making moves to rectify this situation.
Who Are These New Recruits?
Interestingly, the tax office isn’t just recruiting in bulk. They’re focusing on experience. The number of top-grade staff, likely more seasoned in ensuring compliance, has grown by over 300. Furthermore, the elite Fraud Investigation Service, responsible for probing deeper into suspicious tax activities, has welcomed 539 new members, raising its total strength to almost 5,000.
Most of these new hires, according to accounting firm Price Bailey, come with a robust tax background from the private sector. This means they’re well-versed in handling intricate tax investigations.
What’s The Forecast?
With such a sudden and hefty increase in manpower, one can anticipate an uptick in HMRC investigations in the coming years. Andrew Park, a partner at Price Bailey, suggests that HMRC now possesses greater resources than before the pandemic. As a result, he believes that HMRC is poised to intensify its enforcement activity, potentially surpassing pre-pandemic levels in the next couple of years.
HMRC’s official statement reinforces this belief. They maintain that their primary role is to collect taxes, and this new investment in manpower will significantly bolster their capacity to combat fraud and ensure fairness in the tax system.
Impact on Small Businesses
A Closer Look?
While ensuring compliance is beneficial for everyone, this development might raise questions for small businesses. Will they be under a microscope more frequently?
Heather Rogers, a tax expert at Aston Accountancy, weighs in on this. She predicts anti-money laundering to be a top concern, especially for the Fraud Investigation Service. Moreover, after reports of HMRC penalising £2.3 million for incorrect inheritance tax valuations, it seems likely that inheritance tax errors might be under tighter scrutiny.
However, Park reassures businesses that if their affairs are in order, they shouldn’t fret. Still, the frequency of routine inquiries is set to increase.
What About Customer Services?
Here’s a twist. As HMRC ramps up its compliance team, it has also been shutting down some customer service helplines. This move might perplex many, especially considering documented instances of lengthy wait times and errors like a £38,000 bill issued due to a typo.
Rogers emphasises the importance of HMRC working alongside individuals and businesses rather than being adversarial. She nostalgically recalls times when local inspectors had a rapport with businesses, facilitating better compliance. In her view, the current approach seems more machine-driven, relying heavily on technology, and may be less effective.
Park shares the sentiment. While he acknowledges the potential financial benefits for the Treasury, he fears it won’t do much for those seeking assistance from HMRC.