Covid-era tax avoidance costs £9billion as lawsuits collapse, watchdog says

Thousands of staff who used to check that people and businesses were paying the right amount of tax have been moved to Covid support programs, which means far fewer people were investigated

Many investigations into alleged non-compliance have been halted by HMRC during the pandemic (

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Tax avoidance and non-compliance during the pandemic have cost the government £9billion, Whitehall's spending watchdog has found.

Thousands of staff who typically checked that people and businesses were paying the right amount of tax have been transferred to Covid support schemes by HM Revenue & Customs (HMRC).

Around 1,350 workers have been redeployed to Covid schemes throughout 2020-21, reducing the number of those working on tax compliance by 12%, according to the National Audit Office (NAO).< /p>

Before the pandemic, tax revenue from compliance work averaged 5.2% of HMRC's total revenue.

This figure fell to 4.2% between 2020 and 2022, a reduction of £9 billion.

During the pandemic, HMRC has suspended many inquiries into suspected non-compliance, except where there is potential fraud or criminal activity.

Dame Meg Hillier, chair of the Commons Public Accounts Committee, said HMRC "needs to step up its work on tax compliance" (

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It closed 29% fewer cases in 2020-21 compared to the previous year.

And fewer in-person investigations have been conducted by the service due to the lockdowns.

As many courts were not functioning at that time, criminal prosecutions for tax offenses dropped to 163 in 2020-21 from around 700 the previous year.

HMRC analysis suggests that the tax gap - the difference between the amount owed to the department and the amount it has received - is likely to continue to grow over the next few years.

As the department recruits and trains new compliance staff, they will be less experienced and therefore less effective in the short term.

The watchdog has called on HMRC to improve the efficiency of its compliance work to ensure more money is available for cash-strapped utilities.

NAO Chief Gareth Davies said: 'HMRC had to act quickly to reallocate resources to Covid-19 programs as the circumstances of the pandemic demanded. However, this directly affected its ability to investigate cases of individuals and companies that do not pay the tax duty.