Small businesses evading tax cost exchequer £5.5bn

HMRC estimated £5.5bn was lost due to tax evasion in 2022-23 – 81% from small businesses (up from 66% in 2019-20) according to a new National Audit Office (NAO) report on tax evasion in retail.

The tax authority has not estimated the scale of evasion by sector but it has targeted campaigns at some high-risk retailers including takeaways and sweet shops.

The report found that HMRC does not have a specific strategy to clamp down on tax evasion as a result of which it lacks a focus on its performance in this area. Instead its aim is to stop overall levels of non-compliance increasing. This means there has been too little emphasis on some widespread forms of fraud in the retail sector such electronic sales suppression and abuse of the insolvency process to avoid paying tax debts (known as phoenixism).

HMRC has had success in...