Recent research shows that HM Revenue & Customs (HMRC) collected £9.8 billion in extra revenue through tax investigations into the UK’s largest businesses for the Treasury last year.
The vast majority of this extra cash, accounting for £6 billion, came from investigations into VAT, while £2.6 billion came from probes into underpayment of corporation tax. In total, HMRC’s haul was up by 12 per cent on 2017-18’s figure.
However, the taxman did not just rely on large firms to collect the extra tax; separate research has revealed that HMRC collected more than £1.7 billion from VAT investigations into small businesses last year, which was a whopping 18 per cent increase on the amount collected in 2017-18.
According to the report, the growth in the ‘VAT gap’, which represents the difference between what HMRC thinks it should receive and what it actually collects, has resulted in HMRC becoming increasingly aggressive in pursuing underpaid VAT.
In these investigations, HMRC tends to focus on cash-based small and medium enterprises as they are deemed a higher risk for underpayment.
There is increasing pressure on HMRC to claw back as much money as possible, and VAT looks to be a lucrative area of investigation, as the tax authority itself estimates that £12.5 billion of all VAT due in unpaid from last year.