HMRC issued over 66,000 penalties for inaccuracies on VAT in the tax year 2021-22, a 66% increase on the previous year and a 63% increase on 2019-20. The collective value of penalties issued was over £159m – a 26% increase on the previous year and a 32% rise on 2019-20.

After a slowdown in compliance activity during the pandemic, HMRC is hiring 2,500 more people to work in its compliance teams to investigate non-payment, and it is prioritising the collection of unpaid taxes. 

Xeinadin said the risk of penalties was likely to grow as HMRC devotes more resources to closing the tax gap for VAT, a revenue generation priority for HMRC.