The Budget 2025 sets out a tougher HMRC compliance strategy for the next two years. With new enforcement teams, expanded debt-collection capability and stronger penalties, HMRC is expected to respond more quickly and assertively when tax returns, payments or disclosures appear irregular. If you are already in dispute with HMRC, or facing an enquiry that is escalating, these changes will impact how quickly the case progresses and how HMRC expects you to engage.
At a glance
- The Budget introduces six major measures to close the tax gap, including a new small business evasion unit, stronger CIS powers, expanded debt-recovery staff and tougher penalty regimes.
- HMRC is also increasing its use of informant intelligence and investing in compliance officers to pursue long-running arrears.
- These measures will speed up investigations and reduce HMRC’s willingness to extend deadlines or negotiate on weak proposals.
- If you are already under enquiry, it is important to present accurate, timely and credible information — and to understand when civil or criminal thresholds may be crossed.
What are the six Autumn Budget measures designed to close the tax gap?
The Chancellor’s Autumn Budget includes a targeted package of measures aimed at increasing tax recovery and reducing deliberate and non-deliberate non-compliance. According to public commentary, the six core elements include:
- A new 350-investigator unit focused on small business evasion and hidden economy activity.
- Stronger Construction Industry Scheme (CIS) enforcement powers, particularly around false deductions and labour-only subcontractor arrangements.
- Expansion of HMRC’s debt management staff to speed up collection of overdue tax.
- A tougher late-filing and late-payment penalty regime, doubling penalties in some areas.
- Increased resources for tackling tax avoidance promoters, including company directors associated with offshore or high-risk schemes.
- A strengthened whistleblower reward scheme, encouraging informants to report suspected fraud or under-declared income.
Together, these measures will increase HMRC’s capacity across both civil and criminal investigations and reduce its tolerance for delays or incomplete disclosures.
FWJ Takeaway: The Budget gives HMRC more people, more tools and more data. Expect faster escalations and shorter deadlines.
How will the new small business evasion team change HMRC enquiries?
The creation of a staffed, ring-fenced evasion team means HMRC will concentrate more effort on sectors and business models where undeclared income, cash turnover or inaccurate expenses are more common. Investigations in these areas are likely to become more intrusive, with early requests for bank statements, till data, supplier records and personal accounts.
- Businesses that rely on cash-heavy operations, subcontracted labour or informal pricing structures may see more enquiries and quicker movement to formal information notices.
- HMRC officers working in these units will also have more time to pursue cases that might previously have been allowed to lapse due to resourcing limits.
This will be particularly relevant for individuals or companies already under enquiry for irregularities in VAT, corporation tax or PAYE returns. The increased staff capacity means existing cases will progress faster, with less room for missed deadlines or incomplete explanations.
FWJ Takeaway: If you are already subject to an enquiry, expect HMRC to request information earlier and press harder for full transparency.
Why will stronger CIS powers lead to more disputes in construction?
The construction sector continues to be a major focus for HMRC, and the strengthened CIS rules mean contractors and subcontractors will face more scrutiny around labour supply, deductions and employment status. HMRC’s new powers may include:
- greater ability to remove gross-payment status
- faster interventions where records are incomplete
- tougher sanctions for inaccurate monthly returns
- stronger checks on labour-only subcontractors and agency arrangements
Contractors already engaged in disputes over employment status, payroll inconsistencies or missing CIS records should prepare for quicker follow-up action. Cases that might previously have taken months to escalate may now move directly to penalties or additional tax assessments.
FWJ Takeaway: CIS enforcement is tightening. Contractors and subcontractors with existing issues should expect faster assessments and less negotiation room.
How will HMRC’s increased debt-recovery capacity affect ongoing disputes?
HMRC is recruiting more officers to pursue overdue tax, with a clear focus on accelerating collection from individuals and companies in arrears. This is likely to lead to:
- earlier use of accelerated payment demands
- quicker movement to enforcement action, including distraint
- more frequent use of winding-up petitions for companies
- less flexibility on long-term Time to Pay arrangements
If you are already behind on payments or negotiating an instalment plan, HMRC will expect credible and realistic proposals supported by financial information. Weak or unsubstantiated repayment plans are likely to be rejected more frequently.
This is particularly relevant where HMRC is considering enforcement options such as field force visits, taking control of goods or petitioning for winding up. FWJ’s tax dispute and insolvency teams regularly advise on these risks and help manage HMRC engagement.
FWJ Takeaway: HMRC is moving towards faster and firmer debt recovery. If you owe tax, you will need a realistic plan supported by evidence.
How will tougher late-filing penalties and whistleblower rewards influence existing enquiries?
The new penalty regime doubles or significantly increases fines for late filing and late payment in certain areas. For those already under enquiry, this means additional financial exposure if missing information or non-compliance continues.
- At the same time, the strengthened whistleblower reward scheme increases the likelihood of HMRC receiving informant information.
- This may result in earlier escalation of existing enquiries, especially where allegations involve deliberate behaviour or concealed income.
Individuals already corresponding with HMRC should be cautious about providing partial or inconsistent information. If HMRC believes it has received conflicting accounts or insider intelligence, it may consider moving a case from a civil enquiry towards a Code of Practice 9 (COP9) investigation.
FWJ Takeaway: Higher penalties and more informant reports mean unresolved issues carry greater risk. The quality and consistency of your response now matters more than ever.
What practical steps should you take if you are already in dispute with HMRC?
If you have an ongoing enquiry or dispute, the Budget measures make it even more important to engage constructively and proactively. Key steps include:
- confirming who will manage communication with HMRC
- supplying clear, accurate and timely information
- reviewing any past disclosures for completeness
- considering whether voluntary disclosure could protect your position
- ensuring any repayment or Time to Pay proposal is supported by financial evidence
- taking early legal advice to avoid escalation into a more serious COP9, COP8 or criminal enquiry
FWJ’s tax dispute team, led by former HMRC specialists, can help assess the risks, prepare responses and negotiate with HMRC on your behalf.
FWJ Takeaway: The Budget increases the pace and pressure of HMRC action. Early, specialist advice will help you manage the dispute safely and minimise risk.
Frequently Asked Questions
Speak to Francis Wilks and Jones today about your tax dispute
If you are already in dispute with HMRC, or you are concerned that your case may escalate under the new enforcement measures, contact us today. We have over 25 years’ experience resolving tax disputes and are led by former HMRC specialist Andy Lynch.
