An estimated £5.5 billion was lost due to tax evasion during 2022/23, according
to a report published by the National Audit Office (NAO).
The NAO stated that 'significant weaknesses' in government systems have
left the UK 'too open' to tax evasion. According to HMRC, 81% of the
tax evasion came from small businesses.
HMRC said that, while the overall level of tax evasion has stabilised in recent
years, it has increased amongst small businesses. Whilst HMRC has not estimated
the scale of evasion by sector, it considers takeaways and sweet shops as
high-risk retailers.
The NAO said that HMRC does not have a specific strategy to clamp down on tax
evasion, and instead aims to stop overall levels of non-compliance increasing.
It also said that there has been too little emphasis on some widespread forms of
tax evasion, such as electronic sales suppression (ESS) and abuse of the
insolvency process to avoid paying tax debts, which is known as
'phoenixism'.
Gareth Davies, Head of the NAO, said:
'Although tax evasion has been growing among small businesses, HMRC has so
far lacked an effective strategic response.
'Its assessment of risks has given too little emphasis to widely used methods
of evasion such as sales suppression and phoenixism. It has also failed to
use new powers to tackle tax evasion.'
Internet link: NAO