HM Revenue and Customs (HMRC) suspects more than 2,000 organisations are evading tax and national insurance contributions (NIC) on employees’ pay and benefits.
This number has increased by 31% since last year, up from 1,599 to 2,009 employers.
The use of real-time information (RTI) reporting is thought to have helped HMRC launch more investigations into irregularities.
Under RTI, which was introduced between April and October this year, HMRC receives monthly updates on employees’ pay and benefits.
Chris Thomas, senior associate at law firm Pinsent Masons, said: “Termination payments, employment status or internationally mobile employees are the classic problem areas where employers often get it a bit wrong [with payroll].
“The new RTI regime has made HMRC aware of more issues than it might have picked up previously, and that is the point of it. Things are now less likely to slip through the net.”
Some of the cases under investigation involve an employer withholding all of its employees’ pay-as-you-earn (PAYE) tax and NICs with the intention of keeping the money, or where a senior executive is given a company car or other job perks without paying tax.
Other businesses may be evading tax in a bid to survive by using employees’ payroll tax to keep trading.
Thomas added: “There is a variety of reasons and some [organisations], if they are very short of money and are struggling, might see it as an easy way to save some money.”
An HMRC spokesperson said: “The government has made almost £1 billion available to HMRC to tackle avoidance and evasion and to ensure that the minority who try to avoid their responsibilities pay the tax due.”