Spring Statement: funding for HMRC to tackle tax evaders

Tax evaders and those who blatantly ignore their tax liabilities are going to be targeted more harshly by HMRC, the chancellor said in her first Spring Statement, while the wealthy team will be expanded

HMRC has been briefed by chancellor Rachel Reeves to crack down on tax evasion with a planned hike in the number of individuals charged every year.

With a commitment not to announce any new tax measures fulfilled, Rachel Reeves flagged her decision not to increase taxes in the Spring Statement, instead focusing on investment in infrastructure and defence spending, and giving HMRC more funding to tackle the dual scourges of tax avoidance and, the much more serious and criminal tax evasion.

Slightly stronger growth projections from the Office for Budget Responsibility (OBR) also gave her slightly more confidence with growth expected to hit 1.9% in 2026-27 with the general mood of the Spring Statement decidedly more upbeat than last autumn’s dismal Budget.

The chancellor has set out plans to hire more staff for HMRC, and envisages a major crackdown on tax evaders, although whether this will raise the hoped for £1bn in extra taxes is open for debate.

On tax evasion, Reeves told MPs during her first Spring Statement speech: ‘As I promised in the autumn, this Statement does not contain any further tax increases, but when working people are paying their taxes while still struggling with the cost of living, it cannot be right that others are still evading what they rightly owe in tax.

‘In the Budget I delivered the most ambitious package of measures that we have ever seen to cut down on tax evasion, raising £6.5bn per year by the end of the forecast.

‘Today I go further, continuing our investment in cutting edge technology, investing in the HMRC’s capacity to cut down on tax avoidance and setting out plans to increase number of tax fraudsters charged every year by 20%. These changes raise a further £1bn taking the total figure raised by tackling tax evasion to £7.5bn.’

As a result, HMRC will expand its counter-fraud capability to increase the number of individuals charged for the most harmful fraud by 20%, up from 500 to 600 per year by 2029-30.

Michelle Sloane, partner at RPC, said: ‘HMRC have significant powers at its disposal to tackle tax evasion, however, it has not been making full use of these powers.

‘HMRC criminal prosecutions for tax evasion have decreased by more than 50% from 749 cases in 2018/19, to only 344 in 2023/24.

‘This reduction raises serious concerns about the diminishing deterrent effect of HMRC’s enforcement actions. It will be important for HMRC to set specific objectives and measurable targets to achieve its stated aims as its current powers and resources are not being used effectively.’ 

Anyone holding untaxed funds offshore also needs to put their tax affairs in order. 

HMRC is going to overhaul its approach to offshore tax non-compliance by the wealthy, recruiting experts in private sector wealth management and deploying AI and advanced analytics to help identify and challenge those who try to hide their wealth, wherever they try to hide it.

Adam Craggs, partner at RPC, said: ‘‘The recruitment of private sector wealth management experts to identify hidden wealth signals a step change in HMRC’s capabilities.

‘The tax authority already has extensive access to data and cutting-edge technology, which has driven a notable increase in time consuming and costly investigations into the affairs of high net worth individuals in recent years.

‘While the precise application of these new resources remains to be seen, it is clear that wealthy taxpayers will remain firmly in HMRC’s sights for the foreseeable future.’

The chancellor also gave HMRC £100m in new funding to recruit an additional 500 compliance officers from April 2025. This will raise £241m in unpaid tax over the next five years, according to the Spring Statement calculations.

There will also be a shakeup of HMRC’s debt management teams with an additional 600 staff, who will work with the private sector to make collecting tax debt more efficient including through automating admin processes.

This is a real priority for HMRC. 

The problem for HMRC is that its ability to collect unpaid tax debt is deteriorating. At the end of December 2024, tax debt – unpaid tax liabilities owed to HMRC  – was over £44bn, more than double the level five years ago.

Around £20bn of these outstanding tax debts were over 12 months old and harder for HMRC to collect.

In terms of actual action on tax evaders, additional criminal investigations will focus on ‘delivering a strong deterrent’, the Treasury said.

‘This will include tackling those who undermine legitimate trade and small business, fraud committed by the wealthy, fraud facilitated by those in large corporations, and by individuals and companies who make it possible for others to hide money offshore.

Investigations will also address organised criminal attacks, focusing on illicit finance and complex money laundering schemes.’

But while investment in tax collection is one part of the equation, accountants would have liked to see more money put into service improvements at HMRC.

Glenn Collins, head of technical at ACCA, welcomed ‘the investment in the digital capability of HMRC, with a focus on tackling tax evasion’, but he stressed that this was not the fundamental problem.

‘We still see high levels of frustration with HMRC services from professional tax agents and taxpayers,’ said Collins. ‘HMRC investment also needs to tackle key issues such as poor customer service and lengthy response times. Without this, the tax system will not be able to cope with the demands of Making Tax Digital and the UK’s increasingly complex tax landscape meaning errors become more commonplace. 

‘ACCA continues to call for the use of professionally qualified agents to support complex queries, and improvements to communication first and foremost.’

Sara White, Editor, Business & Accountancy Daily