HMRC issues £22m in fines to businesses

New research from The Global Payroll Association (GPA), reveals which UK business sectors have been most heavily penalised for deliberately lying about the amount of tax they owe, as HMRC dishes out £22m for deliberate tax defaulting.

The Global Payroll Association has analysed newly released HMRC data surrounding deliberate tax defaulters* – companies or individuals who have deliberately lied on their tax returns presumably in an attempt to pay less tax – to understand how much UK businesses are being fined and which specific sectors are being most heavily penalised.

According to information published by HMRC (July 2024), almost £22 million worth of penalties have been dished out to UK companies for deliberately lying about their tax affairs.

The sector that accounts for the largest share of this £22m is the Digital Services & Content industry within which companies have been fined £4.3m for deliberately defaulting on tax returns.

The Property Industry, including property development, has been fined £2.5m, followed by Supply Chain & Wholesale Trade (£2.3m), Construction Services including Trades and Engineering (£2.1m), and the Agricultural Industry with Fishing & Farming (£2m).

The other sectors to have been fined more than £1m are Logistics, Courier Services & Transportation Services (£1.9m), Waste Management & Recycling Services (£1.4m), Income – Trusts (£1.35m), and the Hospitality & Food Industry (£1.3m).

Melanie Pizzey, CEO and Founder of the Global Payroll Association, says:

“A business will deliberately default on their tax return in order to avoid paying as much tax as they owe. The motivation for this is often to increase their profit margin, or to reduce outgoings in order to maintain enough money to keep the company afloat and operational. The latter is more likely a motivation for startups or SMEs with a small operating budget.

This may explain why Digital Services is the most heavily fined sector in the UK. Digital Services companies often have small headcounts, and low outgoings, but can also have such limited funds that the simple duty of paying tax can push them over the edge between operating in the red and the black.

But the scale of fines is proof, if proof were necessary,that cutting corners and neglecting tax obligations is no way to find success in business. It’s a false economy because the fines end up outweighing the original cost that was being avoided.

The same logic can be applied across the board. For example, it can be tempting to hire inexperienced people in order to pay lower wages, but the result is often inefficient or lacklustre output. And a company might choose to to avoid spending money on essential administrative processes such as HR and payroll to reduce costs, but by doing so, leave themselves exposed to the risk of process failure which results in staff not being paid promptly and properly, thus leading to high employee turnover when retention is by far the best path to sustainable success and profitability.”

Data tables and sources

• *Current list of deliberate tax defaulters sourced from HMRC (published in July 2024)
• *Details of deliberate tax defaulters sourced from HMRC (published in July 2024)
• Full data tables and sources can be viewed online, here