21.10.2025 | Tax

Forget ghosts and ghouls – the real scare this autumn could come from HMRC. Here, Andrew Diver, Head of Tax at Beatons Group, explains why small businesses are in the spotlight as the taxman sharpens his tools.

October might bring pumpkins, costumes and trick-or-treaters, but for small businesses, the real fright this season could arrive in a brown HMRC envelope.

With the autumn Budget fast approaching, there’s plenty of speculation about where the Chancellor will find funds to shore up the public finances, and one answer is clear – the HMRC is gearing up to close the “Tax Gap” – and small businesses are firmly in the firing line.

What is it?

The Tax Gap is the difference between what HMRC believes it is owed and what actually gets paid. For 2023/24, that figure stood at a spine-chilling £46.8 billion – roughly the size of the UK’s annual defence budget. Unsurprisingly, therefore, it’s becoming a prime target for the Treasury’s fiscal tricks.

Unfortunately for those of you running SME’s more than half of that gap – around £27 billion – is attributed to small businesses.

By comparison, large businesses account for around £6 billion, while mid-sized firms owe close to £4 billion.

Individuals (excluding the self-employed) account for just over £4 billion, criminals for £3.4 billion, and wealthy individuals for £2.3 billion.

In short, the biggest slice of the pumpkin pie lies with small businesses, and that’s precisely where HMRC is pointing its torch.

While it’s tempting to assume HMRC will go after multinational giants or shadowy corners of the hidden economy, their current strategy is far more pragmatic. Follow the numbers.

HMRC has just completed intensive training for 5,500 new enquiry officers, all of whom are joining the Individuals & Small Business Compliance (ISBC) Team. Their mission? Launch around 250,000 additional enquiries over the coming years.

To put that into perspective, there are about 240,000 small businesses in the UK with 10–49 employees. In theory, there’s now enough workforce to look into every single one.

Why the sudden zeal?

Because it pays. For every £1 HMRC spends on enquiry staff, it typically raises £20 in extra tax. In political terms, it’s a no-brainer – or perhaps a zombie-brainer.

For small businesses, though, this isn’t a ghost story you can ignore.

Even those with clean records may find themselves facing more routine enquiries as HMRC casts its net wider.

At Beatons, our clients have historically had very low levels of HMRC scrutiny, which is why we’ve been able to offer fee protection insurance at highly competitive rates.

This covers the professional costs of defending a challenge – even if it goes all the way to court. But with the new wave of investigations coming, no one can afford to assume they’ll be overlooked.

So, how do you keep the monsters at bay?

• Get your records in order. Good compliance is your best defence.
• Work with a reputable accountant who has a track record of handling enquiries effectively.
• Consider fee protection insurance to avoid nasty financial surprises if HMRC comes knocking.
• And don’t expect the helpline to save you – HMRC has redirected resources from call centres to fund these enquiry teams.

This Halloween, while the ghosts and ghouls are out for sweets, HMRC may be out for unpaid tax. Make sure your business isn’t the one caught in their haunted house.

beatons.co.uk