Tax Investigation Targets 2025

In a recent article for Accountancy Daily, Danielle Ford, partner and head of tax disputes, shed light on where HMRC will be focusing its investigations in 2025. With the government under pressure to raise revenue, HMRC is intensifying its compliance efforts. Here's what you need to know to stay ahead and avoid costly tax mistakes.

HMRC’s Master Plan: What’s Coming?

HMRC’s compliance strategy revolves around prevention, promotion, and response. It involves:

• Hiring 5,000 new compliance officers.

• Modernising debt recovery systems.

• Increasing late payment interest rates by 1.5%.

This strategy aims to reduce the £39.8 billion tax gap. With £22 returned for every £1 spent on compliance, HMRC is investing heavily in new investigations.

2. R&D Tax Relief Claims: Innovation Under the Microscope

HMRC is stepping up its scrutiny of research and development (R&D) claims, particularly in software development.

Previously, only 1 in 100 applications were checked. Now, 1 in 5 is under review. Many claimants report that HMRC sometimes fails to fully examine their documentation, causing delays and disputes.

While this is troubling for businesses, there are signs that HMRC may be improving its approach and reducing the number of fresh enquiries.

3. COP 9 Investigations: The Ultimate Compliance Weapon

Expect a surge in COP 9 investigations, which focus on suspected tax fraud. These are HMRC’s most serious civil enquiries and can lead to criminal prosecution if not handled properly.

The key to avoiding prosecution is engaging effectively with HMRC and cooperating fully with the enquiry process.

4. National Minimum Wage: HMRC’s Labour Crackdown

In April 2025, the National Minimum Wage (NMW) will increase to £12.21 per hour. HMRC will be paying close attention to:

Businesses applying the correct NMW rates.

Off-payroll workers to ensure proper classification and payment.

5. VAT on Private School Fees: No More Exemptions

From January 2025, private school fees will be subject to VAT for the first time. HMRC is expected to crack down on any attempts by schools to circumvent these new rules.

HMRC is integrating generative AI to streamline operations. Expect automation in areas like:

• Summarising calls and correspondence.

• Improving complaints handling.

Additionally, HMRC’s mobile app usage has surged by 64%, with nearly four million users relying on its digital services. Despite this digital push, helplines will remain open.

Tech Tools in HMRC's Arsenal

If you’ve been putting off addressing tax worries, now’s the time to act. Whether it’s crypto, R&D claims, or other obligations, you don’t want HMRC knocking on your door.

The Tax Faculty is here to help you navigate compliance challenges and stay ahead of HMRC’s ever-changing priorities. Contact us today and let us help you secure peace of mind.

Don’t Wait – Take Control of Your Tax Compliance Now!

Capital Gains Tax Expertise: The Tax Faculty LLP Managing Partner Charles Tateson Named UK Capital Gains Tax Advisor of the Year 2023

The Finance Monthly Taxation Awards recognises the achievements of tax professionals from around the globe.

Winning such an award is no small feat. It is a reflection of hard work, extensive knowledge, and an ability to navigate the intricacies of the UK tax system.

Read more about Charles and the award here.

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