Why experts predict a wave of enforcement actions

Under the Labor government, HMRC has gone from being reactive to being very proactive and tax experts are predicting increased tax enforcement in the new year.

The government has committed to investing an additional £555 million per year in HMRC resources to improve tax compliance and transform its technology.

The investment aims to raise an additional £5.1 billion per year by the end of the current term of Parliament, as HMRC focuses on closing the tax gap, which is estimated at more than £5 billion.

But as the Public Accounts Committee (PAC) report notes, this figure may be “just the tip of the iceberg.”

As we move into 2026, Andy Brown, global head of tax disputes, Kennedys, stated that “we believe that next year we will see a shift towards increased enforcement actions by national tax authorities, as well as an expansion of the scope of the current tax regime.”

“This will impact clients as it will increase their exposure to investigations, which in turn will increase compliance costs,” he added.

HMRC focuses on enforcement

This comes as HMRC plans to employ 5,000 new compliance officers by 2029/30, with recruitment starting in 2026.

This is not unique to the UK; in the UAE, the Federal Tax Authority has increased investigations by 110.7 percent since 2024, and the OECD’s Pillar Two, a global tax initiative that aims to implement a minimum effective corporate tax rate of 15 percent for large multinational companies, is about to be launched.

This shift is driven by fiscal pressure to increase government revenues, as state spending tightens, and the government’s ability to use technological advances to help fill the gap.

Brown added that another trend in tax disputes in 2026 will be the fragmentation of trade and the use of taxes/tariffs as a geopolitical tool.

“In the last 12 months there has been increased volatility in trade policy, especially from major countries driven by tense relations between world leaders and changing geo-political rivalries,” he explained.

In April, US President Donald Trump announced “Liberation Day” tariffs, a “barrage” of tariffs imposed on countries and businesses that disrupt the international trade order.

Brown added, “There is no doubt that global trade policy in 2026 will continue to create uncertainty, with tariffs and tax policies often used as instruments to maintain national financial security.”

AI will take center stage

Tax experts note that another big trend in tax disputes in 2026 will be the growth of AI.

Broadly speaking, tax authorities are already deploying machine learning tools to detect anomalies, and taxpayers are relying on AI to manage their own exposure. “The impact on clients will be new types of procedural risks,” Brown said.

“Authorities will also increasingly turn to predictive models and algorithm-based audits and assessments, so they can detect more violations with greater accuracy,” Brown explained.

“But on the bright side, there will be opportunities for clients to improve proactive compliance and early engagement through AI,” he added.