‘Tax Gap’ increases again despite measures to crack down on tax avoidance

‘Tax Gap’ increases again despite measures to crack down on tax avoidance

The gap between the amount of tax collected and what is owed to the Treasury has grown to £34 billion, according to HM Revenue and Customs (HMRC).

6.8% of overall tax due for 2012/13 remains uncollected, compared to 6.6% in 2011/12.  This results in the tax gap increasing by £1 billion.

How is the gap broken down?

HMRC have attributed £3.1 billion of the gap to tax avoidance, and state that this is down from £3.4 billion in the prior year.

£14.2 billion of income tax, national insurance contributions or capital gains tax went uncollected, along with £12.4 billion of VAT.  Corporation tax made up £3.9 billion of the gap, with excise duties accounting for £2.9 billion.

The increase in the overall tax gap was due to an increase in the VAT gap of £0.9 billion and an increase of £0.3 billion in uncollected tobacco duty.

What can we expect from HMRC to tackle this?

Despite this increase, the UK still has one of the lowest tax gaps in the world.  However, HMRC has made it clear that the agency will continue to deploy its resources and skills to maintain pressure on taxpayers to reduce the gap.

Whilst an element of the gap relates to aggressive tax avoidance, it seems that much of the £34 million gap relates to declared and unpaid taxes. This suggests that businesses and individual taxpayers are still struggling to pay these bills, even as we climb out of recession.  

What is clear as we approach the May 2015 election is that HMRC will continue to push all taxpayers to pay their taxes in order to balance their books. 

If you would like more information or would like to discuss your tax affairs in general, please contact our Tax Partner, Chris Barrington on the details below:

Chris Barrington
email: chris.barrington@jsllp.co.uk
telephone: 01942 292505