Fast-growth companies have long been celebrated as the lifeblood of the UK economy — innovative, agile, and capable of generating rapid job creation. Yet these same qualities also place them squarely in the sights of HMRC, which is intensifying its clampdown on suspected tax under-payment.
HMRC’s compliance work contributed to record tax revenues of £875.9 billion for the last tax year. In the same year, HMRC estimates that it collected £48 billion of tax that would have gone unpaid without proactive HMRC interventions.
A combination of expanded enforcement capacity, AI-driven analysis and a host of corporate criminal ‘failure to prevent’ offences at HMRC’s disposal, mean that fast-growth businesses are now at greater risk than ever of a tax investigation. Company owners and directors who fail to act proactively may soon find themselves the target of HMRC’s increasingly assertive compliance activity.
HMRC has been expanding its operational capabilities. The department has doubled the size of its tax evasion team, reflecting its intention to pursue more complex and high-value investigations. It is increasing training for its enforcement teams.
The increase in personnel is accompanied by a major investment in artificial intelligence and advanced data-analytics tools. These technologies allow HMRC to cross-reference vast amounts of financial data, identify patterns that suggest under-reported tax, and quickly narrow its focus on companies exhibiting anomalies. AI accelerates what would previously have taken months of manual analysis, enabling HMRC to cast a much wider net with far greater accuracy.
One visible sign of this new approach is the wave of letters HMRC has started to send to selected companies. These letters are directed at businesses whose reported corporate tax liabilities appear significantly lower than those of comparator companies operating in similar sectors and of similar size.
Recently HMRC brought its first charges under the Criminal Finances Act 2017 for the corporate criminal offence of failing to prevent the facilitation of tax evasion. The move signals HMRC’s growing confidence in using criminal enforcement against companies for tax evasion.
In fast-growth businesses, rapid expansion often outpaces the development of internal controls, tax governance frameworks, and compliance processes. In the early stages of high growth, leadership teams are typically focused on scaling operations, securing investment, and entering new markets. Tax risk management, by contrast, frequently lags behind — sometimes significantly. Vulnerabilities make such companies highly attractive to HMRC as “low-hanging fruit”: large enough to be worth investigating, yet not always sophisticated enough to withstand close scrutiny.
The cost of inaction can be severe. HMRC has the power to impose substantial penalties, initiate criminal proceedings, and hold directors personally accountable in certain circumstances. Reputational damage, investor concern, and the disruption of day-to-day operations can also follow.
Given this environment, company owners and directors should not wait for an HMRC letter to arrive, or worse a raid. The prudent approach is to take the initiative now. Conduct a thorough review of tax compliance, examine internal systems for potential weaknesses, and ensure appropriate procedures are in place to meet the expectations of HMRC. Companies should be ensuring they have in place reasonable procedures to prevent falling foul of criminal laws, tailoring their policies to the particular risks faced by their organisations. Staff training is key, as is ensuring sufficient checks on those with whom the company is doing business.
In today’s enforcement climate, fast-growth companies must recognise that they are firmly on HMRC’s radar. With more investigators, more data, and more legal tools than ever, HMRC is accelerating its pursuit of under-compliance. The safest path forward is one of proactive risk assessment and strengthened governance — before HMRC comes knocking.
Francesca Titus is a white collar crime litigation barrister and a partner in the London office of international law firm, McGuireWoods. She can be reached at ftitus@mcguirewoods.com
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