Tax non-compliance during pandemic cost UK £9 billion

04 Jan 2023

Tax non-compliance during the pandemic cost the UK government £9 billion, according to a report from the National Audit Office (NAO).

HMRC redeployed around 1,350 workers to COVID-19 support schemes throughout 2020/21, shrinking the number of those working on tax compliance by 12%, the NAO said.

According to the NAO, this reduced the tax authority's capacity to investigate people and businesses not paying the correct levels of tax.

Before the pandemic, tax revenues from HMRC's compliance work were, on average, 5.2% of its total revenues. This dropped to 4.2% between 2020 and 2022, causing a £9 billion reduction in revenues.

Gareth Davies, Head of the NAO, said: 'HMRC had to move swiftly to reallocate resources to COVID-19 schemes, as the circumstances of the pandemic demanded. However, this directly affected its ability to investigate cases of people and businesses not paying the right tax.

'There is now a risk that more people ultimately fail to pay the right tax or escape investigation or prosecution. It is concerning that HMRC's planning indicates that non-compliance may grow following the pandemic. The next two years are critical, and swift action is likely to be needed to stem potential losses.'