HMRC targets “dodgy shops” in new compliance crackdown

The government has announced a new crackdown on businesses suspected of facilitating tax evasion, with HMRC increasing its focus on so-called “dodgy shops” used to enable tax fraud. What is HMRC targeting?

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The initiative is aimed at businesses that provide services designed to help others evade tax, including the creation and sale of false invoices, the operation of disguised payroll arrangements and other schemes intended to conceal taxable income.

According to HMRC, these businesses play a key role in enabling wider tax evasion and undermine compliant businesses. Announcing the campaign, Tax Minister James Murray warned operators that HMRC is increasing enforcement activity and making greater use of intelligence and data analysis to identify those involved. The government says the measures form part of its wider strategy to close the tax gap and tackle the hidden economy.

HMRC already has a range of powers available, including penalties, criminal investigations and the ability to publish details of those involved in facilitating tax avoidance and evasion. The latest announcement suggests that more resources will be directed towards identifying and disrupting businesses that provide these services.

While the focus is on deliberate non-compliance, the announcement serves as a reminder that businesses should carry out appropriate due diligence before engaging advisors, payroll providers or tax planning arrangements. Schemes that appear to offer unusually favourable tax outcomes can attract HMRC scrutiny and potentially expose users to significant liabilities.

The message from HMRC is clear: it’s increasingly focused not only on taxpayers who evade tax, but also on those who help make it possible.

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