More collaboration needed to tackle evasion

The true cost of tax evasion is likely to be vastly underestimated as loopholes in the system make it too easy for fraudulent behaviour to go unchecked say MPs on the Public Accounts Committee (PAC) in a new report.

HMRC estimated that tax evasion cost £5.5bn in lost revenue in 2022-23 81% of which could be attributed to small businesses. But the committee noted that legislation introduced in 2021 making online marketplaces liable for VAT from overseas sellers led to £1.5bn in additional taxes a year five times greater than HMRC predicted. It suggested that this implies HMRC may have underestimated the level of fraud.

The committee was concerned by the tax authority’s lack of curiosity to investigate the issue adding that the problem seemed to be exacerbated by a lack of collaboration between HMRC Companies House and the...