5 ways HMRC compliance has changed

Our experienced claims team see a broad array of HMRC enquiries into a wide range of taxpayers. This positions us well to identify trends and provide informed advice to our clients.

We’ve noticed that HMRC’s compliance activity has changed a lot over the last five years, with the period since COVID seeing a particularly marked evolution. That’s down to the way tax compliance has changed in this time, with HMRC left having to adapt to new challenges and opportunities. From a review of the insurance claims that we have handled, here’s how we have seen HMRC change in five key areas:

1. An increase in aspect enquiries

Tax enquiries now tend to focus on specific areas where HMRC has already identified specific risks – aspect enquiries, in other words. It’s a way for HMRC to take a more targeted approach that makes most efficient use of stretched resources and helps HMRC collect any extra tax as quickly as possible. We regularly come across aspect enquiries into:

• CGT transactions (shares, property and assets)
• Capital allowance claims – Annual Investment Allowance/Structural Buildings Allowance
• Business expenses relating to repairs and renewals

HMRC has focused on these areas in particular because of the scope for discrepancies, which means more potential for revealing additional tax liabilities – streamlining their efforts to these areas will most likely yield results.

2. Homing in on cryptocurrency and online marketplaces

We’ve noticed HMRC paying more attention to cryptocurrency in its compliance activities, particularly with reference to crypto trading and the capital gains implications of selling cryptocurrency. In parallel to this, we have seen a rise in enquiries by HMRC into online traders who use marketplaces such as Amazon, eBay, OnlyFans and Vinted, to name but a few. HMRC has had to adapt its strategy to accommodate the many new complexities that have arisen with the advent of digital currencies and online platforms – emerging sectors whose taxable activities HMRC wants to make sure are fully accounted for.

3. A decline in full enquiries into corporation and income tax

We’ve seen a decline in full enquiries into corporation and income tax, probably due to a combination of high costs and poor outcomes for HMRC. We saw a 37% reduction in the number of full enquiry claims notified to us in 2024, compared with 2022. From the claims we have seen, only a small proportion of the full enquiries closed in 2024 yielded additional tax payable over £10,000. Full enquiries haven’t disappeared completely, but data shows that they’re happening less than they did five years ago – suggesting that HMRC is prioritising more cost-efficient compliance methods.

4. Desktop VAT visits

On the VAT front, we’ve noticed a trend towards HMRC conducting desktop visits, allowing them to conduct VAT checks without the expense of sending out officers. It’s a move that businesses and accountants alike have welcomed because it avoids the need for businesses to allocate time and effort for an HMRC visit.

However, despite known resourcing issues, 2024 saw a rise in HMRC reverting to its previous method of conducting in-person VAT visits. This could suggest that HMRC intends to double down on thorough VAT compliance checks going forward.

5. Other types of checks

While CT, IT and VAT enquiries constitute the majority of the claims we handle, we’re still seeing other types of claims, including:

• Employer compliance reviews
• National Minimum Wage (NMW) checks
• Requests for information under Schedule 36

Although these types of checks aren’t a main focus for HMRC, we’d still recommend accountants and businesses alike are alert to the potential risk of facing them.

Staying ahead of HMRC compliance activity: expert support when you need it most

It’s important to remain vigilant and prepared for HMRC’s compliance activities, and to seek the right advice when necessary.

Markel fee protection clients have access to both highly experienced ex-HMRC consultants for advice and support, and an expert claims team that includes practice and insurance professionals, all of whom are there to support your practice during an investigation.

When you need extra support, or your client has a more complex requirement, we offer specialist consultancy services.

We are experienced in handling a wide range of disclosures and have had numerous successes in resolving tax disputes utilising the Alternative Dispute Resolution (ADR) process. Knowing the right tactics to deploy and executing them correctly is essential to getting the right result.

Whether it’s a routine investigation, serious fraud enquiry, or an opportunity to apply for ADR, referral to our team of ex-HMRC inspectors provides expert advice and support to achieve positive outcomes for your clients.

Find out more about the support the team can offer here or contact the team by email