In their latest Measuring Tax Gaps bulletin, HMRC has estimated that the difference between the total tax expected and the total amount actually paid for 2019/20 was 5.3%. This equates to roughly £35 billion for that financial year ...
Some findings from the bulletin:
- a long-term reduction in the overall tax gap, falling from 7.5% in the 2005/06 tax year to 5.3% in the 2019/20 tax year, with the tax gap remaining low and fairly stable for the fourth year
- the total tax gap for VAT is £12.3 billion. Statistics show there has been a long-term reduction for the VAT gap from 14.0% in the 2005 to 2006 tax year to 8.4% in the 2019 to 2020 tax year
- 43% (£15.1 billion) of the tax gap is attributed to small businesses, whereas wealthy customers and individuals account for the smallest share of the tax gap at 4% (£1.5 billion) and 7% (£2.6 billion), respectively
- the tax gap for wealthy individuals fell from £1.6 billion in the 2018 to 2019 tax year to £1.5 billion in the 2019 to 2020 tax year
- 'failure to take reasonable care' accounts for the largest proportion of the tax gap at 19% (£6.7 billion), whereas avoidance is the smallest proportion of the tax gap at 4% (£1.5 billion)
- the Inheritance Tax gap has decreased from an estimated £425 million (7.4%) in 2018/19 to £350 million (6.3%) in the 2019 to 2020 tax year
Impacts from the COVID-19 pandemic are expected to be shown for the 2020/21 tax year, published in next year's Measuring Tax Gaps bulletin.
HMRC say it's very important for them to be transparent in everything they do, so publish the bulletin every year. They are one of only two tax authorities anywhere in the world who do this.
I'll be very interested to see the 2020/21 Measuring Tax Gaps bulletin.
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