UK Inquiry Tracker

Tax evasion in the retail sector

Public Accounts Committee Closed Inquiry

Opened: 31 Oct 2024 Closed: 3 Apr 2025 Parliament page

HMRC estimates that £5.5bn of tax was lost due to evasion in 2022-23. This is equivalent to 0.7% of total theoretical tax liabilities, and is most prevalent among small businesses. Of these estimated evasion losses, 81% come from small businesses including companies, partnerships and sole traders. This has risen from … Read more HMRC estimates that £5.5bn of tax was lost due to evasion in 2022-23. This is equivalent to 0.7% of total theoretical tax liabilities, and is most prevalent among small businesses. Of these estimated evasion losses, 81% come from small businesses including companies, partnerships and sole traders. This has risen from 66% of losses in 2019-20. These losses prevent a level playing field between businesses by giving evaders an unfair competitive advantage, and deprive the public purse of its revenue. The National Audit Office (NAO) reported in 2024 that tax evaders can easily exploit government systems. Significant weaknesses remain around making fraudulent company registrations more difficult, with gaps in checks around online retailers. VAT non-compliance by overseas retailers selling goods and services online resulted in estimated losses of around £700m, according to the report, of which around £300m was deliberate evasion. The Committee has long scrutinised HMRC’s work to tackle tax non-compliance, evasion and fraud. The Committee warned in 2017 that British businesses were being hit hard by illegal tax practices in its report on tackling online VAT fraud and error , while its report on managing tax compliance following the pandemic called on the tax authority to ensure for it never to be easier to cheat the tax system than to comply with it. Based on the 2024 NAO report, the Committee will hear from senior HMRC and Treasury officials on subjects including: - HMRC’s strategy to tackle tax evasion in retail; - Reducing risks of tax evasion; and - How effectively HMRC responds to different methods of tax evasion in retail. Please note the Committee is unable to assist with individual cases. Please look at the requirements for written evidence submissions and note that the Committee cannot accept material as evidence that is published elsewhere. If you have evidence on these issues please submit it here by 23:59 on Thursday 05 December 2024. Show less

10 Recommendations

17 Conclusions

1 Report

1 Oral session

4 Letters

1 Event

Activity timeline 8 events

6 May
2025

Report published

Treasury minutes: Government response to the Committee of Public Accounts on the Ninth report from Session 2024-25

12 Feb
2025

Report published

9th Report - Tax evasion in the retail sector

27 Jan
2025

Correspondence

Letter from the Chief Executive and First Permanent Secretary of HM Revenue and Customs relating to the oral evidence session held on 16 De…

17 Dec
2024

Correspondence

Letter to the First Permanent Secretary and Chief Executive of HM Revenue and Customs relating to the Accounting Officer Assessments for th…

17 Dec
2024

Correspondence

Letter from the Registrar of Companies at Companies House relating to the briefing on the inquiry into Tax evasion in the retail sector, 13…

16 Dec
2024

Oral evidence

Oral evidence session

16 Dec
2024

Correspondence

Letter to the Chief Executive and Registrar of Companies at Companies House relating to the inquiry into Tax evasion in the retail sector, …

16 Dec
2024

Formal meeting (oral evidence session) · Room 8, Palace of Westminster

Committee event

Oral evidence sessions 1 session

16 Dec 2024

View on parliament.uk

Dean Beale · The Insolvency Service Louise Smyth · Companies House Penny Ciniewicz · HMRC Sir Jim Harra · HMRC

Reports 1 report · click to expand

Title	HC No.	Published	Items	Response
9th Report - Tax evasion in the retail sector	HC 355	12 Feb 2025	27	Responded

Recommendations & Conclusions

9 results

10 Conclusion Acknowledged

9th Report - Tax evasion in the re…

HMRC lacks a specific strategy solely focused on tackling tax evasion.

HMRC does not have a specific strategy for addressing tax evasion.23 In 2019 HMRC set its latest strategy to tackle tax non–compliance, which is built of three strands: promoting compliance through education and support; preventing non–compliance by improving policies and … Read more

Government Response

The government agrees with the committee's recommendation and states that HMRC is looking into a specific strategy for evasion as it might consider a specific strategy for a behaviour if that behaviour requires a particular type of response.

HM Treasury

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11 Conclusion Acknowledged

9th Report - Tax evasion in the re…

HMRC considering developing a specific strategy for tax evasion, but none currently exists.

HMRC told us it has some separate and specific strategic approaches to particular types of non–compliance, such as serious fraud and illicit tobacco, but not for tax evasion.26 It told us that evasion is just one element of the tax … Read more

Government Response

HM Treasury

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12 Conclusion Acknowledged

9th Report - Tax evasion in the re…

Government investment enables HMRC to reduce the overall tax gap, including evasion.

Previously HMRC had an overall aim to stop the tax gap increasing.29 HMRC told us that it now wants to reduce the tax gap.30 At Autumn Budget 2024, the government increased HMRC’s settlement for 2025–26 by 4.5% in real terms … Read more

Government Response

The government agrees with the committee's recommendation and states that HMRC wants to reduce the tax gap and highlights investments to increase compliance staff.

HM Treasury

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13 Recommendation Acknowledged

9th Report - Tax evasion in the re…

HMRC lacks specific objectives or targets for tackling tax evasion rates.

HMRC does not have a specific focus on, or explicit objective for, its performance in tackling tax evasion.33 HMRC explained that it is driven by an overall compliance yield target which is designed to close the overall tax gap, but … Read more

Government Response

HMRC will increase its budget by £762 million for 2025-26 to boost compliance and customer service capacity, including investing in IT systems, data and tax practitioners.

HM Treasury

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15 Recommendation Acknowledged

9th Report - Tax evasion in the re…

HMRC, Companies House, and Insolvency Service commit to increasing collaboration to tackle phoenixism.

At Autumn Budget 2024, the government announced that it was increasing collaboration between HMRC, Companies House and the Insolvency Service to tackle phoenixism.40 The Insolvency Service told us that, since the publication of the National Audit Office’s report, it had … Read more

Government Response

HMRC will develop a concrete plan to increase collaboration between HMRC, Companies House and the Insolvency Service to tackle phoenixism and will write to the Committee within 6 months to set out its plan.

HM Treasury

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16 Recommendation Acknowledged

9th Report - Tax evasion in the re…

HMRC and Companies House system integration for joint registration faces significant long-term challenges.

HMRC and Companies House have explored opportunities from Companies House’s new powers, including a single streamlined system for registering and filing company, Corporation Tax and VAT documentation which would provide more assurance over the addresses of registered businesses. HMRC and … Read more

Government Response

HMRC will write to the Committee in 6 months to update them on plans and progress regarding closer cooperation on company registrations and de-registrations, accounting and filing, as well as sharing risk intelligence and data.

HM Treasury

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17 Conclusion Acknowledged

9th Report - Tax evasion in the re…

Limited historic Companies House powers enabled widespread fraudulent abuse of the UK company register.

Until April 2024, Companies House had limited powers to check the validity of information provided to it by registered companies. It also had limited enforcement and intelligence–gathering powers, and limited scope to share data with other public bodies. The lack … Read more

Government Response

The government accepts the case for exploring options to improve the authenticity and integrity of company address information on the register and DBT and Companies House will report to the Committee on progress in November 2025.

HM Treasury

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19 Conclusion Acknowledged

9th Report - Tax evasion in the re…

Full ECCTA operationalisation, particularly mandatory director identity verification, requires further system development and legislation.

Some measures introduced under ECCTA will not be fully operational until Companies House develops the necessary systems and capability, or until further secondary legislation is in place. This includes verifying directors’ identities.53 Companies House told us identity verification will be … Read more

Government Response

HM Treasury

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20 Conclusion Acknowledged

9th Report - Tax evasion in the re…

Companies House lacks legal powers for business address verification, hindering fraud tackling.

The identity checks that Companies House is now responsible for are not intended to verify the address or place of business.57 Companies House told us that address verification, which it says would be an additional burden on businesses, is not … Read more

Government Response

HM Treasury

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Government Response AI assessment · 25 of 10 classified

Accepted 14

Accepted in Part 1

Acknowledged 9

Deferred 1

Total 10 recs + 17 conclusions

Correspondence 4 letters

27 Jan 2025 To committee Letter from the Chief Executive and First Permanent Secretary of HM Revenue and Customs relating to the oral evidence session held on 16 December 2024 on Tax evasion in the retail sector, 10 January 2025

Parliament page

17 Dec 2024 From committee Letter to the First Permanent Secretary and Chief Executive of HM Revenue and Customs relating to the Accounting Officer Assessments for the Making Tax Digital Programme and the Locations Programme, 12 December 2024

Parliament page

17 Dec 2024 To committee Letter from the Registrar of Companies at Companies House relating to the briefing on the inquiry into Tax evasion in the retail sector, 13 December 2024

Parliament page

16 Dec 2024 From committee Letter to the Chief Executive and Registrar of Companies at Companies House relating to the inquiry into Tax evasion in the retail sector, 12 December 2024

Parliament page