HMRC to Ramp Up SME Investigations

The latest figures from HM Revenue and Customs (HMRC) paint a concerning picture for UK businesses.

The tax gap (the difference between what should be collected and what actually is) has reached a record £46.8 billion for the 2023/24 financial year, representing 5.3% of total tax due.

Why SMEs are in the spotlight

Small businesses account for a staggering 60% of this tax shortfall. The data reveals that corporation tax contributes 40% of the overall gap, with the main causes being:

failure to take reasonable care (31%)
genuine errors (15%)
deliberate evasion (14%)

HMRC’s enhanced enforcement strategy

The government has committed £1.7 billion over four years to fund a significant expansion of HMRC’s capabilities, including:

5,500 new compliance staff specifically for investigations
2,400 additional debt management roles
Enhanced digital systems via Making Tax Digital (MTD)

MTD is already expected to generate over £4 billion in additional revenue by 2030, while the income tax version launching in April 2026 is projected to raise £1.95 billion by decade’s end.

What happens during an HMRC enquiry?

HMRC will demand documents, question your accounts and may visit your premises. Even if no extra tax is owed, you’ll face professional fees of thousands of pounds.

Investigations are costly, stressful distractions from running your business. Whether it’s a full enquiry or targeted compliance check, you’re liable for all professional costs.

How to protect your business

The good news? We’re here to help. Our Fee Protection Insurance means we handle everything if HMRC investigates: