HMRC bulks up compliance division

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Peninsula Team, Peninsula Team

(Last updated )

In the past year alone, HMRC has increased the number of its compliance staff by over 3,000 as it looks to reverse a sharp decline in tax revenue, according to Price Bailey.

The tax authority has recruited 3,084 additional staff to its customer compliance unit since 2021/22, showing a 12% rise in a single year.

On top of this, the number of tax inspectors in the Fraud Investigation Service (FIS), which sits within the customer compliance division, has increased by 539 staff in the last year alone, rising from 4,386 to 4,925.

The data, obtained by Price Bailey under the Freedom of Information Act, also revealed that the number of staff working in compliance in the three highest grades increased by 344 since 2021/22, from 3,197 to 3,541.

Many of the higher-grade staff recruited are more likely to be experienced tax professionals from the private sector and often lead complex tax enquiries.

Tax revenue attributed to HMRC compliance work fell as a proportion of tax revenue from an average of 5.2% before the pandemic to 4.2% in 2021-22, the lowest level since 2011-12.

According to the public accounts committee (PAC) report, this equated to £9bn less yield over the two years compared with its performance pre-pandemic.

HMRC’s compliance staff were also seen as less productive due to social distancing restrictions and the loss of more experienced staff.

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On average, those still working on tax compliance generated £1.1m of compliance yield a year per staff member, compared with £1.3m before the pandemic.

Andrew Park, partner at Price Bailey, said: ‘The drop off in compliance activity is undermining the deterrent effect of HMRC’s work. There is growing pressure on HMRC to catch up on compliance activity and this hefty increase in staffing levels suggests that the number of targeted investigations should significantly rise in the coming years.

‘HMRC has claimed that the loss of experienced staff has contributed to the decline in compliance activity, but these numbers clearly show such people have been replaced. While it may take a while for new recruits at senior grades to get up to speed, their expertise should start yielding results.

‘It is reasonable to expect a lag between being allocated additional resources and seeing them bear fruit. HMRC now has significantly more compliance resources than before the pandemic so it is difficult to see how HMRC can fail to return enforcement activity to pre-pandemic levels and beyond over the next one or two tax years.'

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