HMRC is going after dodgy high street shops, but new Budget powers mean honest mistakes could now cost far more. Here’s what’s changing and how to prepare.
- HMRC plans more than 30,000 high street interventions this year, aimed at criminal fronts, but the Budget’s new measures could reach legitimate businesses too.
- Most of the tax gap comes from carelessness and error, not fraud, and proposed rules would make ignoring a known mistake much costlier.
- Tidy digital records, tills that match your bank deposits and fixing errors early all help to minimize risks.
When HMRC promised 30,000 high street interventions in June, the target was clear: vape shops, barbers and souvenir stores used as fronts for organised crime.
Yet, last month’s Budget suggests the impact could stretch further. The government plans to bring in mandatory software standards for tills, give HMRC the power to send “correction notices” to businesses it suspects of making errors, and recruit 670 more compliance officers, many of them expected to focus on smaller firms.
And with most of the tax gap coming from honest mistakes rather than fraud, the biggest risk for legitimate owners isn’t a raid – it’s a careless error that turns expensive.
We explain what’s changing and offer simple guidance on how honest businesses can stay on the right side of HMRC.
Is your business actually in HMRC’s sights?
Probably not for a raid. HMRC announced on 12 June that it will carry out more than 30,000 interventions in 2026-27, including unannounced visits, seizures and warning letters.
According to the government department, the focus is on cash-heavy sectors where criminal networks hide, such as vape shops, barbers, souvenir shops, candy stores and convenience stores.
It’s also a response to public frustration, with the ACS Community Barometer 2026 finding that almost one in three people (31%) blame “dodgy shops” for their high street’s decline. Most shops in those sectors will, of course, be entirely legitimate.
However, the numbers behind the crackdown tell a different story. HMRC’s latest figures put the UK tax gap at £59.2bn for 2024-25, and small businesses account for 62% of it. Evasion makes up 12% of the total. Failure to take reasonable care is the biggest driver at 35%, with plain errors adding another 16%.
In other words, carelessness is a far bigger problem than crime, and the Budget measures are built with that in mind.
What’s changing for honest businesses?
The biggest shift is a proposed “duty to correct”. Under draft legislation, taxpayers would have to fix an inaccuracy once they know about it. If they don’t, it would be treated as deliberate for penalty purposes, even if the original mistake was an honest one.
That matters because the time limits are so different. HMRC can currently go back four years for an error made despite reasonable care and six for a careless one, but up to 20 for a deliberate one.
HMRC would also get the power to send a Customer Correction Notice when it suspects a mistake, asking you to check your figures and either correct them or explain why no correction is needed.
There is a safety net, though. If it’s your first notice in six years and you take reasonable steps to put things right, you won’t be penalised for anything short of a deliberate error. None of this is law yet. It’s expected in the 2026-27 Finance Bill.
Then there are the tills. The government will bring in mandatory software standards for point-of-sale systems to tackle sales suppression, with a technical consultation planned for summer 2027. If you run a shop, café or salon, that will eventually mean checking that your system is compliant with the pending regulations.
Finally, HMRC are planning to recruit 670 more compliance officers, taking its target for new recruits from 5,500 to 6,170 by 2029-30. Advisers expect many to focus on small and medium-sized firms.
Ultimately, the crackdown is aimed at the shops that give the high street a bad name, not independent hospitality and retail businesses just getting on with it. But with HMRC gaining more data and more staff, “I didn’t know” is about to become a much more expensive excuse.
The good news is that most of the risk comes down to habits you can change now. Here’s where to start:
- Treat any HMRC letter as urgent: How quickly and fully you respond will matter more than ever.
- Fix known mistakes early: Telling HMRC voluntarily is usually treated far more leniently than waiting for it to find the error.
- Match your till to your bank: Reconcile takings, till records and deposits regularly. Gaps between them are exactly what HMRC’s checks look for.
- Go digital before you have to: Under the new Making Tax Digital rules, sole traders and landlords earning over £30,000 must keep digital records and send quarterly updates from April 2027.
