What HMRC’s tax gap means for SMEs

HMRC’s recent figures reveal a concerning trend that could directly impact your business. The tax gap (the difference between expected and collected revenue) has reached £46.8 billion for 2023/24, representing 5.3% of all taxes due.

Small businesses under increased scrutiny 

The data shows that small and medium enterprises account for 60% of this shortfall, with corporation tax contributing 40% of the overall gap. The primary causes include: 

• insufficient care in preparing returns (31%); 

• genuine errors (15%); and  

• deliberate non-compliance (14%). 

These statistics explain why HMRC is intensifying its focus on smaller businesses, viewing them as the key to closing this revenue gap. 

HMRC’s enhanced enforcement strategy 

The government has committed £1.7 billion over four years to significantly expand HMRC’s capabilities: 

• 5,500 additional compliance officers dedicated to investigations 

• 2,400 new debt management specialists 

The reality of tax investigations 

When HMRC opens an enquiry, the impact on your business is immediate and significant. They will request extensive documentation, scrutinise your accounts in detail and may conduct premises visits. Even when no additional tax is owed, professional fees typically run into thousands of pounds.  

These investigations create substantial operational disruption, diverting valuable time and resources from your core business activities. 

How we can help 

We can help you stay one step ahead. We offer the expert support you need to keep your tax affairs in order, minimise errors and respond confidently to any enquiry. 

Want to know more? Get in touch today.