Policy paper

HMRC Small and Medium-sized Enterprise action plan

Published 24 March 2026

How we are backing your business

Through Backing your business: our plan for small and medium-sized businesses, we are delivering the most comprehensive package of support for small and medium-sized enterprises (SMEs) in a generation.

Growth is this government’s number one mission and SMEs are the engine room. Our plan is to make the UK the best place to start and grow a business, with a culture that supports entrepreneurship in every community and high street.

We’re delivering:

• the most significant legislation to tackle late payments in over 25 years, giving the UK the strongest legal framework on late payments in the G7
• a new Business Growth Service to simplify finding advice and support, including a new streamlined digital offer, ending the chop and change of previous government business support programmes
• a package of support tailored to high streets to make it easier for SMEs to set up shop, ranging from a new licensing framework to targeted funding for places
• a massive £4 billion finance boost to increase access to finance for entrepreneurs — to inspire the next generation of small business owners, make the UK the best place to start and grow a business, and build a culture that celebrates and champions entrepreneurs

We also committed to making SMEs a national priority, ensuring they have a fair opportunity to win public contracts and setting ambitious SME targets for each department. Each departmental SME action plan sets the steps government departments are taking to maximise SME and start-up spend across their department and wider agencies. These plans also include departmental targets for direct spend with SMEs and the actions being taken to remove and reduce barriers to SMEs bidding for government contracts.

The Procurement Act 2023 creates a more simple and transparent procurement regime, making it easier for SMEs to do business with the government. This action plan sets out why SMEs should work with us, where to find opportunities, and the actions we are taking to reduce barriers for SMEs in bidding for work.

The plan is monitored through an annual publication (as a minimum) of our direct spend with SMEs as a percentage of our total procurement spend.

SMEs are suppliers that have fewer than 250 staff, and have a turnover of an amount less than or equal to £44 million or a balance sheet total of an amount less than or equal to £38 million. For more information, see Clause 122 of the Procurement Act 2023.

Foreword

At HM Revenue and Customs (HMRC), we are committed to fostering a collaborative and inclusive environment for Small to Medium-sized Enterprise (SME) organisations. We recognise the invaluable contributions of SMEs in delivering public services and their deep connections to the communities they serve and the environment.

Our strategic objectives are designed to ensure that we collect the right taxes, provide the right financial support, and maintain a fair and resilient tax administration system. We are dedicated to making it easier for our customers to get their tax right, supporting self-service online, and working with partners to build trust in the tax and customs system.

This action plan highlights our priorities for 2025 to 2026, focusing on improving our understanding of the SME sector, reducing barriers to entry, and increasing SME participation in procurement bids. By creating a more flexible and inclusive commercial system, we aim to benefit suppliers of all sizes, including charities and social enterprises.

We invite you to explore the opportunities outlined in this document and join us in our mission to enhance public services through collaboration and innovation. Your engagement and feedback are crucial to our success. Together, we can build a stronger, more resilient, and compassionate society.

Thank you for your continued support and partnership.

John Hayes
Chief Commercial Officer
SME Senior Commercial Sponsor

Department overview

HMRC is a non-ministerial department established by the Commissioners for Revenue and Customs Act (CRCA) 2005, replacing the Inland Revenue and Customs and Excise. We are the UK’s tax, payments, and customs authority, and we have a vital purpose: we collect the money that pays for the UK’s public services and help families and individuals with targeted financial support. 

Our current priorities are:

• to improve day-to-day performance and the experience of our customers
• to close the tax gap
• to reform and modernise tax and customs administration

To achieve these, we will need to work closely with our third-party suppliers and supply chain to invest in skills, do more to improve our workplaces and modernise the IT tools and systems we use, so that it’s easier and quicker to do our jobs.

Further information about HMRC is available on the [GOV.UK] (https://www.gov.uk/government/organisations/hm-revenue-customs/about).

Why SMEs should work with us

HMRC recognises the vital role our highly skilled and motivated SME partners play in delivering the agility and expertise required to meet our ambitious priorities. SMEs not only provide a more personalised and responsive approach to service delivery, with frequent direct access to decision-makers and operational teams but also create opportunities for innovation. Their ability to adapt quickly and introduce fresh ideas enables us to explore new solutions, drive continuous improvement, and deliver enhanced outcomes for our clients.

HMRC are keen to take advantage of the UK’s diverse SME supplier base to strengthen and diversify our supply chains. Markets are constantly evolving so having a diverse and robust supplier base to call upon protects HMRC’s services from disruption and uncertainty.

By opening our procurements to SMEs, HMRC can drive innovation and value for money to the taxpayer. SMEs can often offer specialist expertise within their industry which is essential when considering national policy and services which could otherwise be overlooked. SMEs with lower overheads are also often able to offer more competitive pricing than non-SMEs or present innovative solutions through challenging industry norms.

We also understand how greater engagement with SMEs supports HMRC’s wider social initiatives.

The benefits to SMEs wanting to work with HMRC are the scope and scale of opportunities that are available throughout the year. HMRC has a vast portfolio of work we require third-party support to deliver providing plenty of opportunities for SMEs to engage and bid for work. Working with HMRC also offers SMEs insights into the parameters and structures within which His Majesty’s Government (HMG) operate which can help when considering future opportunities with other HMG Departments.

HMRC is committed to the prompt payment policy where 90% of all undisputed and valid invoices from SMEs are paid within 5 days and 100% are paid within 30 days. For the financial period 2023 to 2024 HMRC paid on average 94.31% of all invoices within 5 days. HMRC is also a signatory to the New Fair Payment Code which tackles late payments made to small businesses.

Links to departmental commercial opportunities

Direct opportunities

One of the most important things contracting authorities can do is to provide the market with information about current and future public contract opportunities by publishing a forward-looking procurement pipeline. The Procurement Act 2023 achieves this by requiring the publication of pipeline notices in certain circumstances. This is of particular benefit to SMEs, as it provides them with time to plan for future work, ensuring a competitive and diverse market.

Pipeline notices (UK1) for any intended requirement over £2 million are published on Find a Tender.

Our pipeline notices are a forward look for 18 months and are reviewed and updated every 6 months, or as necessary.

View our pipeline of potential activities.

Read about how to look at the notices, notifications and the use of data.

Search and apply for contract opportunities.

Joining frameworks and Dynamic Purchasing System

Joining a commercial agreement, such as a framework or Dynamic Purchasing System (DPS), can put SMEs in front of buyers actively seeking their services.

• framework agreements establish terms for future contracts, providing a pool of pre-selected suppliers from which public sector buyers can call off orders
• DPSs are an ‘always open’ electronic list of pre-qualified suppliers that public sector buyers use to quickly and flexibly purchase goods, services, or works

Search the Crown Commercial Service commercial agreement pipeline for upcoming agreements.

Joining a supply chain

By joining our supply chain, you, as an SME, can gain access to larger government contracts that you might not secure on your own. We believe this is a valuable opportunity to build strong relationships with larger companies and gain invaluable experience working with us. HMRC are also exploring more direct opportunities for below threshold procurements.

You can also use the Find a Tender service to identify potential prime contractors bidding on large government projects. By keeping an eye on these opportunities, you can proactively reach out to these organisations and offer your services as subcontractors or suppliers. We see this as an effective way for you to get involved in significant projects and establish yourselves within our government supply chain.

Many industry bodies and trade associations also advertise opportunities in supply chains.

Further information on how to do business with our department is available on the GOV.UK website.

Departmental supplier events

HMRC routinely conduct market engagement events in advance of upcoming tenders. Notices of HMRC’s intention to conduct these sessions will be published on Contract’s Finder which contain descriptions and Common Procurement Vocabulary (CPV) codes of the goods or services we’re procuring as well as details of how to register your interest to attend.

We are also planning to attend several ‘meet the buyer events’ to share best practice and seek feedback from SMEs when bidding for HMRC work. Please contact us for details on which events we have registered for.

Our actions and milestones

We are continuously reviewing our end-to-end procurement process to ensure SME consideration is embedded throughout and that our procurement processes are streamlined and supported by robust governance. Our aim is that by making our procurement processes more streamlined, we remove barriers and make participation more accessible for SMEs. 

We have taken the following action to-date to improve our engagement with SMEs:

• simplified and streamlined our procurement documents to reduce the burden on bidders when tendering with HMRC
• established a purpose working group to provide strategic oversight and direction on how we implement the SME agenda in harmony with HMRC’s wider organisational goals and objectives (including Carbon Net Zero and Social Value)
• reviewed our internal social value policies to ensure outcomes consider opportunities to maximise SME engagement
• appointing an SME champion who acts as an advocate of small businesses across the department
• ongoing engagement across government through the SME Champions Working Group to establish best practice
• publishing a commercial pipeline which details opportunities to work with HMRC

This work has helped to streamline our procurement processes. Going forwards, we aim to build upon this work by standardising best practice in SME engagement across our procurements.

Improvement action	Benefit to SMEs	Milestones
Engagement with HMRC’s SME Advisory Group: Continuing to engage with our SME Advisory Group, which includes several SME and VCSEs across different sectors, to test our approaches to increasing SME engagement. This will allow our approaches to be assessed against our target audience and ensure we can make procurement processes simpler and more accessible.	This will allow us to sense-check our initiatives against SMEs within the market to ensure our activity best targets development areas.	Ongoing
Strategic Partnerships and Markets Team: Transitioning our current Strategic Supplier Relationship Management team to being the Strategic Partnerships and Markets team with an increased remit on developing SME challengers within markets and appointing an Accountable Executive within this team for SMEs.	This will provide greater central accountability and scrutiny on how we engage SMEs within our procurements.	31 March 2026
Enhanced Analysis and Targeting of SME Spend: For the first time, we will track our direct SME spend figures by contracted spend category and off contract spend.	This will enable effective targeting within different spend sectors and share accountability for direct SME spend attainment across HMRC.	Ongoing
Sharing Accountability: Working towards our SME direct spend target will be introduced in the objectives of all Commercial Directorate staff to maintain accountability in decision making across all categories. This will be supported by training to our commercial teams to standardise earlier identification within markets with opportunities for direct SME spend as well as sharing best practice templates and approaches to maximise SME engagement.	This aims to make HMRC’s procurements more accessible to SMEs by standardising approaches and removing confusing practices.	31 March 2026
Challenging Standard Approaches: Reviewing all contracts due for renewal by the end of the 2027 to 2028 Financial Year and our anticipated routes to markets, to identify and challenge in advance whether our standards routes to market are unnecessarily prohibitive to SMEs.	This will enable us to review whether we can open repeat procurements to new supplier bases which SMEs have greater access to.	31 July 2026

Case studies

Zylpha (Direct SME Spend)

“The tender process was smooth. We were invited to tender via the gCloud framework and were given a full list of requirements by the prospective client. There were some initial discovery calls and meetings to better understand what was needed, and everything was clearly communicated throughout.

There are many stories of companies being swamped by the procurement process that comes with engaging with the public sector. The reality is that through frameworks like gCloud a lot of this has been removed. It’s unlikely that Zylpha as a business would have been able to tender if the process was anything like what the horror stories make out.

What really stood out is that we had clear engagement with the project management team, the technical (IT) team and the end users. This made it so much easier to really understand the pain points from all sides.

gCloud itself takes so much of the pressure out of the bidding process as pricing is already published, the contract is already published, so it just comes down to making sure that we can meet the requirements set by the client.

It’s such a fair process as it’s completely transparent.

Delivery was straightforward. The client needed some bespoke changes which were agreed and a timeline set out. When everything from our side was ready this was then packaged up and sent over. In terms of setup and installation this was rolled out to users across multiple sites at the same time.

Working with central government departments is a huge reputational boost within the company. Knowing that we are a trusted supplier with a good relationship means that when other government departments make an enquiry, we have referability and can demonstrate our credentials.

Financially the award of the contract means that we’ve been able to recruit additional staff, which means that we can accelerate our plans faster. This means bringing out new features, products and changes much faster.

Zylpha is classified as a micro-business, and as such we were very nervous about taking on a client of HMRC’s size and reputation. The reality is that we work closely with a handful of key stakeholders to make sure that they are getting the level of service from us. We thought we would be dealing with hundreds of users, but this hasn’t been the case.

The 2 main lessons we’ve learned are:

As this is public sector it’s not uncommon for a stakeholder to move to a new role in a different organisation, this means that when the new person is brought on, it really helps to bring them up to speed as quickly as possible.

As we are a software business, there are routine product updates and these need to be communicated way earlier than with our corporate clients.

Don’t be afraid to get on the frameworks (gCloud etc) and then be open and honest with the government departments throughout the process. Apart from that, make sure to set up regular account management meetings so that everyone from both sides is aware of what is happening”.

Inland Border Facilities (Indirect SME)

HMRC is also mindful of opportunities to drive SME engagement through supply chains where it may not be feasible for an SME to be awarded a contract as the prime supplier. For example, when procuring the Inland Borders Facility (IBF) Enduring Site Operator requirement, whilst the value and scale of the contract was prohibitive for SMEs to bid, bidders were encouraged through the award criteria to open supply chain opportunities to SMEs. The successful supplier concentrated their supply chain for this opportunity on local SMEs and social enterprises, including the following initiatives:  

• ​whilst undertaking the procurement process, the supplier developed relationships with WEConnect, MSDUK, Enterprise Nation, Social Enterprise Kent (for Sevington) and Môn Creating Futures (for Holyhead)
• ​the successful supplier operates a Supply Chain Inclusion Programme (SCIP) and uses this to target new Inland Borders Facility specific supply chain partners from underrepresented groups including women, minority ethnic groups, LGBTI, ex-forces, ex-care leavers and disability groups. They provide at least annual ‘meet the buyer’ events through this channel
• ​offering a suite of training courses to a minimum of 20 local organisations based near each Inland Borders Facility site to support SMEs to meet the demands associated with joining large supply chains to grow their markets
• delivering a minimum of 2 Professional Mentorship Programmes per annum for SME, VCSE and Diverse Owned Business (DOB) potential supply chain partners

Our spend with SMEs

Financial year	Total procurement spend (£)	Direct spend with SMEs (£)	Direct spend with SMEs %
2021 to 2022	£2.5 billion	£177 million	7%
2022 to 2023	£2.5 billion	£175 million	7%
2023 to 2024	£2.4 billion	£146 million	6%
2024 to 2025	£2.4 billion	£136 million	6%

HMRC’s direct SME spend targets for the next 3 financial years are as follows:

• Financial Year 2025 to 2026: 6.5%
• Financial Year 2026 to 2027: 7.25%
• Financial Year 2027 to 2028: 8.00%

Historical central government spend with SME’s is available online.

Our payment performance

Government is leading by example and paying our suppliers promptly. Late payment is an issue for businesses, especially smaller businesses, as it can adversely affect their cash flow and jeopardise their ability to trade. The government recognises that the public sector should set a strong example by paying promptly. The public sector is required to pay their suppliers in 30 days and report on their performance on an annual basis. 30-day terms also apply in public sector supply chains. Our department’s latest payment performance is set out below.

Latest report covering April 2025:

2025 to 2026 Financial Year	Percentage of invoices paid within 5 days	Percentage of invoices paid within 30 days
Quarter one	93.62%	99.98%
Quarter 2	92.12%	99.99%
Quarter 3	95.26%	99.99%
Quarter 4 (Forecast)	93.67%	99.98%

Further information on government payment policy and legislation is available on the GOV.UK website.

SME Hub

The SME hub is a dedicated space for SMEs looking to work with the government. Here you will find links to other departmental action plans and centralised guidance on bidding for government work.

Contact us

More information about our department is available on GOV.UK. For more information email Adam Woodall.