HMRC has increased the number of compliance staff by over 3,000 in the past year alone as it looks to reverse a sharp decline in tax revenue from compliance work, according to data obtained by accountancy firm Price Bailey.
According to data obtained by Price Bailey under the Freedom of Information Act, HMRC has recruited 3,084 additional staff to its Customer Compliance unit since 2021/22, a 12% rise in a single year.
The number of tax inspectors in the Fraud Investigation Service (FIS), an elite unit which sits within the Customer Compliance division, has increased by 539 staff in the last year alone, rising from 4,386 in 2021/22 to 4,925 in 2022/23.
The data also reveals that the number of staff working in Customer Compliance in the three highest grades increased by 344 since 2021/22 from 3,197 to 3,541.
Price Bailey explains that many of the higher-grade staff recruited are likely to be experienced tax professionals from the private sector and will lead complex tax enquiries.
A recent report by the House of Commons Committee of Public Accounts stated: “Tax revenue directly attributable to HMRC compliance work (compliance yield) 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. This equated to £9 billion less yield over the two years (2020–21 and 2021–22) compared with its performance before the pandemic. HMRC’s compliance staff were also less productive due to social distancing restrictions and the loss of more experienced staff. On average, those still working on tax compliance generated £1.1 million of compliance yield a year per staff member, compared with £1.3m before the pandemic.”
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Data obtained by Price Bailey under a separate Freedom of Information Act request revealed that the number of inheritance tax enquiries undertaken by HMRC has plummeted by 43% since 2019/20, from 5,658 to 3,208 in 2022/23.
Commenting on this, Price Bailey partner, Andrew Park, 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.
“The Fraud Investigation Service is like the special forces of Customer Compliance. It comprises many of the most highly qualified and experienced staff. The substantial ramping up of FIS investigators suggests that HMRC means business.”
According to Price Bailey, social distancing restrictions during the pandemic likely meant that junior compliance staff were working less closely with their more experienced colleagues and there was less oversight of their work, leading to a fall in output. With those restrictions lifted it is beholden on HMRC to maximise the value of the resources it has and ensure taxpayers get value for money.