Over the past three years, in an environment when maximising tax collection feels more important than ever, HMRC has brought in an additional £15.8bn from large businesses as a result of its enhanced compliance work, double the amount secured in 2021-22.
The National Audit Office’s recent report on HMRC's large business directorate praised its "cooperative" approach and found that there is “little doubt” that its work is providing good value for money.
With HMRC now considering whether to expand the directorate’s model, what are the key lessons to be taken away from this success story?
The large business directorate owes much of its success to its model and design. It takes a much more hands-on approach to compliance with large businesses in comparison to other areas which typically tend to rely more on bulk data profiling. The dedicated customer compliance managers who build a deep knowledge of each of the UK’s 2,000 or so large businesses are key. Our report found that large businesses hold more favourable views of working with HMRC than other groups, driven by positive perceptions of these close contact relationships.
In fact, part of the reason the model seems to work is because large businesses are persuaded to be open about their compliance. We found that across HMRC’s interventions with the large business population – where it identifies that it needs to investigate an issue – in a third of cases in 2024-25 this originated from the businesses’ own disclosures. The directorate also relies on regular risk reviews of each business to determine how much scrutiny is needed and this drives a further 19% of these interventions.
Unsurprisingly, the approach is resource intensive. The large business directorate cost £166m in staff pay in 2024-25, employing approximately 2,500 full time equivalents.
Crucially though, the approach does deliver value for money, bringing in £95 for every £1 spent which is four times more than HMRC achieves across all taxpayers. The large business tax gap – which measures the difference between those taxes that should be paid but aren’t – is also on a long-term downward trend and represents less than 1% of total theoretical tax owed.
Given these successes, one might wonder about the large businesses which still fail to behave and what other options HMRC has at its disposal. Since 2016, HMRC has had the power to put a large business into special measures, applying sanctions for continued poor behaviour. It has never made use of this but sees it as an effective deterrent with cases of egregious behaviour rare. HMRC tends to favour intervening before special measures are warranted using its High-Risk Corporates Programme to accelerate an intervention where it is particularly concerned about a business’s behaviour. It has collected an additional £32bn in tax through this route since the programme began in 2006. We have recommended that HMRC should not let any barriers it faces in using its legislative powers get in its way and needs to explore what these might be.
HMRC has also learned from previous bad press. In 2011, the NAO and Public Accounts Committee raised concerns regarding overly-favourable tax deals offered to large businesses. HMRC responded and implemented changes to improve transparency and oversight and in returning to the topic we found no evidence that so-called ‘sweetheart’ deals were being reached, with HMRC following its own governance structures strictly.
With HMRC now potentially expanding its model to more businesses, it is important that careful planning and analysis underpin this change. HMRC must consider how many and which businesses to include, as well as developing a cost-benefit analysis for the different options and a plan for monitoring and testing the impact of any changes.
Similarly, HMRC should review the findings of our report, reflecting on where its approach is working well, so that this can be shared with other HMRC directorates. Our 2025 report on taxing wealthy individuals found that non-compliance is rising amongst the highest-earning taxpayers and that an ambitious strategy was needed to help tackle this. Given the shared issues of scale and complexity between the large business directorate and the wealthy tax team, there are certainly lessons to be taken and implemented by HMRC.
Louise Bladen is a director at the National Audit Office and the author of its report Taxing large businesses