HMRC crackdown with construction businesses facing scrutiny

HMRC achieved a record compliance yield of £50.2 billion in 2025-26, narrowly missing its £50.4 billion target, as it used AI and advanced data analytics to protect and recover £10 billion in tax revenue. Construction businesses face increased scrutiny, with the Construction Industry Scheme tax risk identified as a specific focus, and experts warn that recent legislative changes may disproportionately impact the sector. Penny Simmons of Pinsent Masons said construction businesses should expect greater HMRC scrutiny and strengthen oversight of their labour supply chains.

HMRC crackdown with construction businesses facing scrutiny Overall, HMRC achieved a record compliance yield of £50.2billion, although it narrowly missed its £50.4billion annual target Construction businesses face increased scrutiny from HMRC in a crackdown on tax avoidance. HMRC's latest annual report and accounts revealed the department used AI and advanced data analytics to help protect and recover £10billion in tax revenue during 2025-26. Overall, HMRC achieved a record compliance yield of £50.2billion, although it narrowly missed its £50.4billion annual target. The report also confirmed Labour Party https://www.birminghammail.co.uk/all-about/labour-party government tax arm HMRC is ahead of schedule in recruiting an additional 5,500 frontline compliance officers by 2030 as part of wider efforts to reduce the UK's tax gap. Penny Simmons, who specialises in tax risk management at Pinsent Masons, said: "It is particularly interesting to note the shift in focus in the sectors being targeted within the large business unit over the last year." READ MORE Andy Burnham £300 bonus payments instantly cut to £100 for these households "The tax under consideration, which guides HMRC's focus of attention in terms of future investigations, highlights a doubling of tax risks in the automotive and construction sectors since last year, and Construction Industry Scheme CIS tax risk has been identified as a specific risk this year," she said. Simmons added that recent legislative changes, notably new rules combatting tax avoidance by umbrella companies and changes to the CIS rules, "may disproportionately impact the construction sector, which is heavily reliant on temporary labour and where there is widespread use of umbrella companies". "Construction businesses should expect greater scrutiny by HMRC and should strengthen oversight of their labour supply chains and ensure appropriate contractual protections are in place," she said. Ian Robotham, tax law expert at Pinsent Masons, said: "The figures demonstrate the increasingly important role of technology in HMRC's enforcement activity. AI and other data analytics are now making a major contribution to HMRC's tax investigation work." "HMRC's Connect system has built up a trove of valuable data and it is now able to deploy AI more to produce a target list of businesses and individuals to investigate," he said.