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HM Revenue & Customs collected an extra £16bn from the biggest businesses last year after it took a “more hands-on approach” with dedicated officials and more fines, the National Audit Office found.
The amount of extra tax obtained from the 2,000 largest businesses as a result of HMRC’s intervention doubled over the past three years, the report said.
The NAO said: “HMRC takes a more hands-on approach than with other taxpayers due to the complex nature of large businesses and the scale of the revenue collected.”
The government’s squeezed finances have heaped further pressure on HMRC to close the so-called tax gap — the difference between what companies should, and do, pay in tax.
For large businesses, HMRC estimated this was £5.8bn in 2023-24, compared with £7.5bn in 2005-06.
The NAO said the increased tax collection was partly due to its increased use of penalties and growing use of data analysis.
The NAO said HMRC had issued 636 penalties to large businesses in 2024-25, compared with 164 in 2021-22, although 71 per cent of the fines over those four years were suspended because the businesses had co-operated well or stopped their non-compliant behaviour.
Overall, HMRC collected £337bn from about 2,000 of the UK’s largest businesses in 2024-25, according to the report.
The NAO’s report found that HMRC’s analysis and data profiling was limited by legacy IT systems, which should be improved as part of the £1.6bn it received in the Spending Review.
Large companies are typically more compliant with HMRC than smaller businesses and account for just 12 per cent of the overall tax gap — but HMRC was justified in pursuing them because, individually the lost tax is higher, about £3mn each on average, the NAO said.
HMRC’s large business directorate was also found to have a return on investment of £95 for every £1 spent on staff pay, which is four times higher than what the agency achieves across all taxpayers.
Sir Geoffrey Clifton-Brown, chair of the public accounts committee, said the extra £15.8bn collected by the department showed “a clear example of an effective approach that represents a good return on investment”.
The NAO also found “no evidence of HMRC reaching special deals with large businesses on how much tax they should pay”, with HMRC’s own testing showing that it had followed its governance processes in 98.1 per cent of cases it examined in 2024-25.
Among other recommendations, the NAO encouraged the directorate to “explore any barriers to using available legislative powers” and “improve the recording of data on IT systems to ensure better understanding of productivity”.
Gareth Davies, head of the NAO, said: “Through its large business directorate, HMRC has developed an efficient and effective approach to ensuring large businesses remain tax compliant.”
“This has made a significant contribution to reducing the tax gap. HMRC should continue to explore whether this approach could usefully be extended to other complex and high-risk businesses.”
A third of HMRC’s interventions into large business tax affairs originated because the business had disclosed the issue itself, the report said.
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