HMRC yield up 64% from personal tax investigations in just a year

Publications that covered this story include The Times on 11 November.
  • Self Assessment enquiries generate extra £1.4bn for HMRC – doubles in five years
  • People increasingly faced with threats of court action and litigation

HMRC’s yield from personal tax investigations jumped by 64% last year, as the increasing threat of court action discourages people from fighting disputed tax claims, our research shows.

The amount of additional tax collected by HMRC from investigations into Self Assessments by individual taxpayers increased to £1.4 billion in 2016/17. This represents a sharp rise from £856 million in 2015/16.

Self Assessment investigations have proved to be one of the fastest growing revenue streams for HMRC.

The rise in revenue from Self Assessment investigations is in part driven by increasing threats of court action by HMRC.

HMRC have been quick to highlight their recent litigation record in warning letters to taxpayers. As a result, taxpayers may be settling up with HMRC to avoid going to court, resulting in a significant increase in additional tax for HMRC.

Areas where HMRC have been litigating include the use of film schemes, employee benefit schemes, and managed service company arrangements.

Improved usage of information may have also contributed to the rise in additional revenue. HMRC are now making greater use of technology, and in particular Big Data, to collect and collate additional information on taxpayers that can lead to investigations.

Mark Giddens, Head of the Private Client department in our London office, says: “The threat of expensive litigation is forcing many taxpayers to pay up without a fight.”

“HMRC are making sure everyone knows about their recent record in court, and are using that to intimidate taxpayers.”

“HMRC’s use of technology also means they now have access to more information on taxpayers, allowing it to generate evidence more rapidly than ever before.”

HMRC’s take from investigations into individual taxpayers rose by 64% in the last year