Mind the gap

By Steven Pinhey, Tax Director

HMRC have recently published their latest statistics on the UK ‘tax gap’ which is measured as the difference between the amount of tax that should, in theory, be collected by HMRC, against what is actually collected for the tax year ended 5 April 2015 (2014/15).

The statistics show that the tax gap has fallen to around £36billion which is 6.5% of the theoretical tax liabilities.  This is a fall from £37billion or 6.9% of the tax liabilities in 2013/14 and nearly 2% lower than in 2005/06.

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Source: HMRC – Measuring Tax Gaps 2016 Edition (October 2016)

HMRC are extremely proud of these figures which is one of the lowest tax gaps in the world compared with such countries as Italy (34%), Mexico (23%) and the USA (16.3%).

The gap is predominately within the SME and large business sectors accounting for £18.3bn and £9.5bn respectively although when this is translated to tax type, VAT alone accounts for £12.7bn with corporation tax only accounting for £3.7bn.

The gap covers a range of behaviours and HMRC have created the graph below to assign value to various types of behavioural attitude. HMRC state that the ‘reductions in successful criminal attacks on the tax system and avoidance are the main behavioural reasons for the reduction in the tax gap since 2005/06.

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Source: HMRC – Measuring Tax Gaps 2016 Edition (October 2016)

Following HMRC’s publication of its Annual Report and Accounts for 2015/16 in July this year, showing an increase of over £19bn in revenue to £537bn, the statistics for 2015/16 are likely to demonstrate further a continued trend in closing the tax gap.

These statistics also highlight HMRC’s commitment to addressing inequalities in the tax system and bearing down on avoidance, evasion, failures and errors.

If you would like to talk to us in a discreet and confidential manner about an issue that you have with HMRC, please speak to Steven Pinhey who heads our Tax Disputes and Resolutions offering, on 020 7490 7766 or email stevenpinhey@lubbockfine.co.uk.  

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