Billions lost through tax evasion as shops exploit system's weak points

The UK is missing out on billions of pounds of revenue each year from small retail businesses that exploit weaknesses in government systems to evade paying tax, the public spending watchdog has warned.

- Phillip Inman

The National Audit Office (NAO), which monitors tax and spending by the government, said the trail of tax debts left by small retailers was widespread and increasing every year.

Retail shops have become expert at growing quickly while paying almost no tax and then becoming insolvent without settling their tax debts, leaving the government out of pocket.

HM Revenue and Customs (HMRC) estimated £5.5bn was lost due to tax evasion in 2022-23 - 81% from small businesses, up from 66% in 2019-20.

The NAO said the situation had worsened significantly since 2011, when firms were allowed to register online with Companies House, including from overseas jurisdictions.

HMRC has targeted sweet shops and takeaways, but is unlikely to have much success until safeguards due to be introduced by Companies House come into effect, the NAO said.

Labour vowed before the election to crack down on "dodgy" candy stores, which had notably proliferated on Oxford Street in central London before a recent fall.