Business
Small Businesses Contribute to 81% of Tax Evasion Losses, NAO Report Reveals
A new report from the National Audit Office (NAO) has uncovered that small businesses are responsible for 81% of the £5.5 billion lost to deliberate tax evasion in the 2022-23 financial year. This comes despite the overall tax gap—the difference between tax owed and tax paid—falling from 7.4% in 2006 to 4.8% in the latest figures.
The report highlighted a sharp rise in the share of tax evasion attributed to small businesses, which has grown from 44% in 2018-19 to 60% in the most recent data. The NAO criticized HM Revenue & Customs (HMRC) for failing to adopt a targeted approach to address the growing issue, particularly in the retail sector, where widespread tax evasion practices such as abuse of the insolvency process are prevalent.
One of the most significant abuses involves businesses folding to evade tax debts, only to re-emerge as new entities. This practice alone cost HMRC over £500 million in 2022-23, yet the Insolvency Service disqualified just seven directors for such abuses, out of more than 6,200 disqualified directors during the same period.
The report also called attention to “electronic sales suppression,” where businesses manipulate their sales records to underreport revenue using specialised software. While HMRC has the power to fine businesses up to £50,000 for using these tools, the NAO suggested that these powers are not being fully enforced.
Despite these criticisms, HMRC has seen some success in combating VAT evasion, particularly by making online marketplaces responsible for collecting VAT on behalf of overseas retailers. This measure has generated an additional £1.5 billion annually. However, the NAO warned that gaps remain, with some overseas companies falsely presenting themselves as UK-based to avoid VAT obligations, exploiting the ease of setting up companies in the UK.
Gareth Davies, head of the NAO, stressed that HMRC has not adequately focused on common methods of tax evasion among small businesses and called for more systematic efforts across government. “Although tax evasion has been growing among small businesses, HMRC has so far lacked an effective response,” said Davies. He emphasized the potential for tighter controls and more aggressive compliance measures to yield substantial revenue.
In response, an HMRC spokesperson highlighted the agency’s record £843.4 billion in tax revenues collected last year, noting that the UK has one of the world’s lowest tax gaps. “The vast majority of businesses pay the tax that’s due,” the spokesperson said. “We will continue to use our civil and criminal powers against the determined minority who refuse to play by the rules.”
HMRC plans to collaborate with other agencies, including the Insolvency Service and Companies House, to address the concerns raised in the report and reduce tax evasion in both the retail and online sectors.
Business
Gary Lineker Places TV Production Company into Voluntary Liquidation Ahead of Tax Rises
Former England footballer and broadcaster Gary Lineker has placed his television production company, Goalhanger Films, into voluntary liquidation as the UK government prepares to raise capital gains tax rates. The move is seen as a strategic decision to minimize tax liabilities before the upcoming increase in tax rates.
Co-owned with former ITV controller Tony Pastor, Goalhanger Films reported net assets exceeding £440,000 in its last published accounts. The liquidation comes in response to the UK government’s announcement in the recent Budget that capital gains tax rates will rise from 10% to 14% in April, with a further increase to 18% in 2025. By liquidating the company now, Lineker and Pastor will be able to take advantage of the current lower tax rate on distributions from the company’s assets.
Tony Pastor confirmed that Goalhanger Films is being “mothballed,” allowing both he and Lineker to focus on their growing podcast venture, Goalhanger Podcasts. The podcast platform, which hosts popular series such as The Rest Is History and The Rest Is Football, reported net assets of nearly £591,000 earlier this year, reflecting the success and rapid growth of the podcasting business.
The liquidation of Goalhanger Films follows the process of Members’ Voluntary Liquidation (MVL), which allows solvent companies to wind down operations in a tax-efficient way. This process enables business owners to treat distributions from retained earnings as capital gains rather than income, potentially yielding significant tax savings under the Business Asset Disposal Relief framework.
Goalhanger Films, launched in 2014, produced high-profile sports documentaries featuring figures like Mohamed Salah and Serena Williams. However, the shift towards podcasts marks Lineker’s strategic adaptation to the evolving media landscape, where podcasts have become a more lucrative and popular format.
Although Lineker stepped down from hosting Match of the Day after a 26-year tenure, he continues to maintain a strong presence at the BBC. He holds contracts to present coverage for major events, including the FA Cup and the 2026 World Cup.
Lineker’s financial move offers valuable lessons for business owners and entrepreneurs, particularly in anticipating tax changes and making timely decisions to maximize financial benefits. Business owners looking to close solvent companies may also find the MVL process an effective way to unlock value efficiently. Additionally, Lineker’s pivot to podcasting highlights the importance of adapting to emerging markets and shifting focus to the most successful ventures.
Business
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