What Is HMRC and What Does It Do in the UK?

If you’re running a UK small business, understanding how HMRC in the UK operates is more than just good practice—it’s essential. From paying taxes to managing payroll and customs, HMRC is involved in nearly every financial step your business takes.

Here’s a breakdown of what HMRC does, and how professional accounting services in the UK can help you stay on top of it all.

What Is HMRC in the UK?

His Majesty’s Revenue and Customs (HMRC) is the UK government’s official department responsible for collecting taxes and enforcing tax laws. It was formed in 2005 by merging Inland Revenue and HM Customs and Excise.

HMRC is a non-ministerial department, which means it operates independently from direct government ministers but still reports to Parliament through HM Treasury. The organisation is governed by Commissioners appointed by the Crown.

For UK small businesses, HMRC is the authority you’ll interact with when managing taxes, payroll, benefits, and trade.

What Does HMRC Do?

1. Collecting Taxes

HMRC oversees the collection of almost every major UK tax, including:

• Income Tax (for sole traders, partners, and individuals)
• Corporation Tax (for limited companies)
• VAT (on goods and services)
• Capital Gains Tax, Inheritance Tax, and Stamp Duties

Staying compliant with tax deadlines and reporting requirements is vital. Many UK small businesses rely on professional accounting services like Counto to avoid penalties and simplify year-end filings.

2. Handling Benefits and Statutory Payments

Beyond taxes, HMRC is responsible for distributing and managing:

• Statutory Sick Pay (SSP) and Statutory Maternity Pay (SMP)
• Child Benefit
• Tax Credits for eligible families
• PAYE (Pay As You Earn) for employers managing payroll

These areas can be complex. Trusted accounting services ensure your business meets obligations while properly supporting your team.

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3. Managing Customs and International Trade

For businesses involved in imports and exports, HMRC:

• Processes customs declarations
• Collects duties and VAT on imports
• Prevents illegal trade activity
• Ensures compliance with trade agreements

Navigating post-Brexit trade rules is especially tricky, so many UK small businesses turn to accountants or customs advisors to stay compliant.

4. Enforcing Compliance

HMRC doesn’t just collect money—it ensures everyone is following the rules. This includes:

• Investigating tax evasion and avoidance
• Enforcing the National Minimum Wage
• Recovering unpaid debts like student loans
• Conducting tax investigations and audits

Accurate bookkeeping and regular financial reviews are your best defence. Reliable accounting services make audits less daunting.

5. Running Government Banking Functions

HMRC is also in charge of key financial infrastructure. It:

• Manages banking services for the UK government
• Supports public spending through effective revenue collection
• Coordinates with HM Treasury to maintain cash flow for national services

Summary

HMRC is at the centre of how the UK manages tax, benefits, and trade. For UK small businesses, understanding how HMRC works—and working with expert accounting services—can make a world of difference. From income tax and VAT to payroll and compliance, Counto helps businesses stay organised, compliant, and focused on growth.

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Counto delivers outsourced accounting that gets smarter over time. Our AI platform learns your unique business patterns and automatically handles daily transactions, while expert accountants ensure everything’s accurate. With direct WhatsApp access to your Customer Success Manager, you get enterprise-level financial management without the enterprise price tag.

Experience accounting that works as hard as you do. Our small business clients cut bookkeeping time by hours and never miss a tax deadline. Ready for accounting that understands your business? To get started, speak to us directly on our chatbot, email [email protected] , or use our contact form.