The Public Accounts Committee (PAC) has urged HMRC, Companies House, and the Insolvency Service to work more closely to combat tax evasion and corporate fraud. MPs criticised the slow progress in joint efforts, highlighting missed opportunities to recover lost tax revenue. They estimate that fraudulent companies comprise 5-20% of registered businesses.

In its latest report, the PAC called for a clear strategy and increased powers for public bodies to tackle fraud. The committee has given HMRC, Companies House, and the Insolvency Service six months – until mid-July – to present an action plan outlining roles, responsibilities, and objectives for tackling fraudulent registrations, corporate abuse, and contrived insolvencies. MPs also want an assessment of how local and shared controls can be improved cost-effectively.

Concerns were raised about Companies House reforms, with MPs warning that it remains too easy to register fraudulent companies. They have urged the Government to strengthen legal powers, allowing Companies House to verify new and existing company addresses.

HMRC estimated that tax evasion cost £5.5 billion in 2022/23, with small businesses responsible for 81% of cases. However, MPs believe the true figure is likely higher, citing a VAT law change in 2021 that raised £1.5bn annually – five times HMRC’s prediction.

VAT fraud was also flagged as a concern, and it was recommended that HMRC improve VAT registration checks and prevent innocent individuals from receiving tax demands linked to fraudulent companies using their addresses.

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