HM Revenue & Customs’ (HMRC) investigations into individuals and small businesses yielded no returns in 47% of cases in 2020-21, analysis by accountancy group UHY Hacker Young found.
This marks an increase in the number of investigations which returned no money to the taxman, up from 31% the previous year.
Graham Boar, partner at UHY Hacker Young, said these fruitless investigations can cause taxpayers unnecessary distress as many would have needed to hire a professional to make sure they did not breach the law.
He added that HMRC’s investigations can be “highly intrusive” into taxpayer’s affairs.
“These statistics show that HMRC is coming up short in too many of its investigations,” Boar said.
“HMRC has a strong track record in collecting money from additional compliance checks, raising £13.6bn ($18.4bn, €16.1bn) last year. But as it aims to close the tax gap, too many people are getting caught in its net.
“Taxpayers need reassurance that there is a valid reason for an investigation to be opened into their affairs and that time and stress isn’t wasted on cases that will yield no results.”
Not money driven
But a spokesperson for HMRC told International Adviser that tax recovery is not always the main reason for opening an investigation.
“Decisions on when and where to intervene are not driven solely by the amount of money that it may recover; we also consider the broader impact our interventions will have on compliance in the tax system as a whole. It’s important for taxpayers to know we cover all parts of the economy impartially, so they can be confident they aren’t being disadvantaged.
“Some of our interventions, such as educational visits, don’t aim to bring in yield. If our compliance check shows there is nothing wrong, we’ll bring it quickly to an end.”
