HMRC investigations into unpaid VAT by large and medium-sized companies jumped 31% to 11,894 cases in the year to March 2025, according to freedom of information data. The government agency is intensifying its crackdown on the £47bn tax gap, with probes into large companies increasing by one-third. The total number of VAT investigations rose to 110,300 when including small businesses and individuals.

This escalation comes as HMRC receives 5,500 new compliance staff to tackle unpaid taxes. The tax gap for 2023-24 stood at £46.8bn, with the VAT component widening to £11.9bn in 2024-25 from £8.9bn the previous year. Nearly one in three large companies faced VAT investigations in the past year, with probes into the UK's largest companies yielding £5.3bn in recovered taxes.

Tax experts attribute the rise to HMRC's improved data matching capabilities and increased scrutiny of businesses taking aggressive VAT interpretations. Pinsent Masons partner Bryn Reynolds noted the high stakes for businesses facing reputational and operational risks. Meanwhile, HMRC emphasized its targeted approach, stating the increase reflects a "smarter, more focused" strategy to support compliant businesses while closing the VAT gap.