In December 2025, HM Revenue and Customs announced the finalists in a competition aimed at helping close the UK tax gap. The initiative forms part of HMRC’s wider effort to modernise tax administration and improve its ability to identify and address deliberate tax evasion. The announcement signals a growing reliance on external innovation and data driven solutions to support compliance activity.
Purpose of the competition
The competition was launched earlier in 2025 with the aim of encouraging private sector organisations to develop practical tools that could strengthen HMRC’s compliance capabilities. Rather than focusing on theoretical ideas, the emphasis has been on solutions that can be tested in live environments and potentially embedded into HMRC’s existing systems.
The tax gap, which represents the difference between tax theoretically due and tax actually collected, remains a central concern for government. Reducing it is seen as a way of supporting public finances without increasing headline tax rates, while also reinforcing confidence in the fairness of the tax system.
The shortlisted finalists
Two organisations were selected as finalists and will now work alongside HMRC during a twelve month pilot phase. This next stage is intended to test how effectively their proposed technologies perform in practice and whether they can deliver measurable improvements in identifying non-compliance and tax evasion.
During the pilot period, HMRC will assess how well the solutions integrate with existing processes and whether they provide actionable insights that compliance teams can use. The focus is on outcomes rather than experimentation for its own sake, with a clear expectation that successful tools could be adopted more widely.
Government and HMRC perspective
Ministers have framed the competition as a practical way of harnessing specialist expertise from outside government. By partnering with private sector innovators, HMRC can access advanced analytical techniques and technological approaches that may be difficult to develop internally at pace.
Senior HMRC officials have also highlighted the value of collaboration. Closing the tax gap is described as a complex challenge that requires new ways of thinking, particularly as economic activity becomes more digital and sophisticated. External partnerships are seen as one way of keeping HMRC’s compliance approach aligned with modern risks.
Role of small and medium sized businesses
One notable aspect of the competition has been the level of engagement from small and medium sized enterprises. More than half of the submissions reportedly came from SMEs, demonstrating that innovation in tax technology is not limited to large multinational firms.
This reflects a broader trend in public sector procurement, where agility and specialist knowledge are increasingly valued alongside scale. Smaller firms often bring focused expertise and innovative approaches that can complement the resources of larger organisations.
What this means going forward
The pilot phase will be critical in determining whether the finalists’ solutions deliver real benefits. If successful, the technologies could form part of HMRC’s longer term strategy for improving compliance and reducing tax losses from evasion and error.
For taxpayers and advisers, this initiative underlines HMRC’s continued investment in data analysis and technology. While the stated aim is to target deliberate non-compliance, it also reinforces the importance of accurate reporting and robust record keeping across all sectors.
Conclusion
HMRC’s competition to help close the tax gap highlights a clear direction of travel. The department is increasingly looking beyond traditional methods and drawing on private sector innovation to strengthen compliance activity. The outcome of the pilot phase will be closely watched, as it may shape how HMRC approaches tax enforcement and risk assessment in the years ahead.