HMRC Tax income is down £30billion
HMRC’s tax income reduced by almost £30 billion in the latest financial year as a direct result of the pandemic, according to its annual accounts.
HMRC’s 2020/21 annual report reports that it had collected £636.7 billion collected in 2019/20, which reduced to £608.8 billion over the latest period.
The reduction was explained as a result of the ‘unprecedented economic circumstances caused by COVID-19, and because pandemic restrictions meant HMRC had to reduce its compliance activity’.
The reduction in compliance activity resulted in a drop of 18% in the additional tax generated by HMRC’s work tackling avoidance, evasion, and other non-compliance. This fell from £36.9 billion to £30.4 billion. The tax authority has estimated that the tax gap is now 5.3%.
The same report states that HMRC delivered £60.7 billion in grants through the Coronavirus Job Retention Scheme (CJRS).
Jim Harra, HMRC’s First Permanent Secretary and Chief Executive, said:
‘Throughout this exceptionally challenging year, we kept all our core services running and ensured customers could access the right help when they needed it. To do this, we had to make choices about how we balanced our resources – for example, we took the conscious decision to divert some of our skilled advisers from PAYE and Self Assessment services to provide COVID-19 support because that’s what individuals and small businesses needed from us most urgently at a time of acute crisis.’
What does this mean for the future?
We already know that HMRC are diverting staff back to its compliance areas, and that they will be looking closely at the Furlough scheme claims that were made. The tax gap has widened, and HMRC’s efforts will now be in reducing that once more.
If you made claims under any of the Coronavirus support schemes, be sure that you keep your records to substantiate the amounts claimed. You are very likely to need them.
All of our clients are covered automatically by our Fee Protection Scheme, as part of our standard fee package.
This scheme covers the cost of our time in dealing with any enquiry by HMRC and provides peace of mind. Enquiries and inspections can be stressful, so scheme membership enables clients to ask us to deal with HMRC without any worries about unexpected bills! This is likely to be a growing issue for businesses over the coming months, as HMRC work through their workloads.
If you aren’t a client of ours, we’d strongly recommend that you ask your accountant whether they offer a similar scheme, and whether you are included in it. Many firms charge an annual fee for enrolment, but it may well be worth your time in signing up this year if you haven’t already done so!
We send regular updates that keep clients aware of changes and suggestions on a wide range of subjects; if you’d like to receive those too, just add your details below and we’ll do the rest! We promise not to bombard you and you can unsubscribe at any time.