Chancellor Rachel Reeves has declared a major offensive on tax avoidance and evasion in her recent Budget, outlining a strategy to secure an additional £10 billion in tax revenue by the 2029-30 financial year.
The government's intensified focus on closing the tax gap over this Parliament includes a suite of new measures designed to ensure everyone pays their fair share.
New Powers and a US-Style Whistleblower Scheme
A central pillar of the strategy involves equipping HMRC with new compliance powers to target fraudulent businesses that deliberately avoid their tax obligations. A significant announcement was the introduction of a US-style whistleblower scheme to combat large-scale tax fraud.
This strengthened reward scheme will incentivise informants who provide valuable information that helps HMRC tackle high-value tax avoidance or evasion. The move was welcomed by experts, with Lloyd Firth, a partner at WilmerHale, calling it a "very positive development."
He added that it could also pave the way for similar incentive frameworks at other UK enforcement agencies.
Broader Enforcement and Modernisation Efforts
The Budget detailed a wide range of administrative, compliance, and debt-collection measures for HMRC, which are collectively estimated to raise an extra £2.3 billion by 2029-30. This builds on reforms from the previous October's Budget.
Beyond the whistleblower programme, the government will undertake additional high-street enforcement activity, crack down on the illicit vape trade, and disqualify rogue directors who abuse the insolvency process to dodge taxes.
Following an extensive consultation, the government will also legislate to further clamp down on promoters of tax avoidance schemes. HMRC is set to receive more investment for its debt management work and new technology to modernise the tax system, increasing the use of data-driven prompts.
Expert Reaction and Political Jibes
While the focus on the tax gap is a common theme for Chancellors, some experts urged caution. Chris Denning, a tax partner at MHA, noted that HMRC already possesses extensive powers and suggested that reviewing the UK's complex tax code would be a more practical step to prevent mistakes and misinterpretations.
During her speech, Chancellor Reeves also took a political swipe, announcing that the government had recovered almost £400 million from "dodgy pandemic spending and contracts." She directly referred to these as "Tory contracts, handed out to Tory peers and agreed by Tory ministers," a comment that provoked jeers from Conservative members.
The scale of the challenge was highlighted by a report estimating that tax evasion alone cost £5.5 billion in the 2022–23 tax year. A Public Accounts Committee report cautioned that this figure might only be "the tip of the iceberg," underscoring the urgency behind the Treasury's new strategy.
