Tax Gap Steady at 5.1%

 

Statistics published today (23 June) by HM Revenue and Customs (HMRC) reveal the estimated tax gap for the 2020 to 2021 tax year is 5.1% – the second lowest recorded percentage – and is unchanged from the previous year.

The annual Measuring Tax Gaps publication estimates the difference between the total amount of tax expected to be paid and the total amount of tax actually paid during the financial year. The majority of taxpayers pay the tax that is owed.

In monetary terms, the tax gap for the 2020 to 2021 tax year is £32 billion. At 5.1%, there has been no change in the percentage tax gap compared to the previous year, although the monetary value has fallen by £2 billion from £34 billion in the 2019 to 2020 tax year.

The total tax due to be paid fell from £672 billion in 2019 to 2020 to £635 billion in 2020 to 2021 due to the economic impact of COVID-19.

Jonathan Athow, HMRC’s Director General for Customer Strategy and Tax Design, said:

“The vast majority of taxpayers and businesses paid the correct amount of tax owed. We want to help everyone to get their tax right as the revenue we raise helps fund our vital public services.”

The estimate for the 2020 to 2021 tax gap is the best assessment based on the evidence available at this time. There is some uncertainty for the tax gap estimates for the first year of the pandemic and estimates could be subject to revisions in future years.

HMRC has published tax gap estimates since the 2005 to 2006 tax year. There has been a long-term reduction in the overall tax gap from 7.5% in 2005 to 2006, to 5.1% in the 2020 to 2021 tax year. The reduction is a result of the government’s action to help taxpayers get their tax right first time, whilst bearing down on the small minority who are deliberately non-compliant.

Further findings for the 2020 to 2021 tax gap publication show:

• the tax gap for Income Tax, National Insurance contributions and Capital Gains Tax is 3.5% (£12.7 billion), representing 39.5% of the total tax gap by type of tax
• the VAT gap shows a strong downward trend falling from 14.1% in 2005 to 2006 to 7.0% in 2020 to 2021
• the Corporation Tax gap reduced from 11.5% in 2005 to 2006, to 9.2% in 2020 to 2021, reaching a low of 6.5% in 2011 to 2012, remaining broadly stable since 2014 to 2015
• at 48% (£15.6 billion), small businesses represent the largest proportion of the tax gap by customer group, followed by criminals at 16% (£5.2 billion)
• individuals account for 8% (£2.5 billion) of the overall tax gap and, at 5% (£1.5 billion), wealthy individuals have the smallest tax gap by customer group
• failure to take reasonable care (19%), criminal attacks (16%), non-payment (15%) and evasion (15%) are the main reasons for the tax gap by behaviour.

HMRC publishes the tax gap because it believes it is important to be transparent in its work. The data helps build trust in HMRC’s ability to support taxpayers in meeting their obligations and pay the tax they owe. It also helps inform the future work and priorities for HMRC, and where it can make the greater difference for taxpayers.

HMRC is the only tax authority in the world that measures and publishes an annual tax gap in such a comprehensive way – covering a single tax year for all the taxes, levies and duties it administers.

Each year, HMRC estimates the tax gap for direct and indirect taxes based on the latest available information. HMRC may revise previous years’ tax gaps as more data becomes available in order to show the long-term trend.

Tax does have to be taxing.

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Print and Post Service Unavailable

 

HMRC have asked us to let people know access to their Print & Post online forms is currently unavailable or intermittent and has been so since Mon pm, due to a technical issue. Customers will get a ‘Service Unavailable’ message when trying to access affected forms. 1/x

— CIOT (@CIOTNews) June 8, 2022

Whatever happened to MTD?

Tax does have to be taxing.

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HMRC Warns People To Stop Using Tax Scheme Promoted by Peak PAYE Ltd

 

HMRC has warned individuals using a tax avoidance scheme provided by Peak PAYE Ltd to withdraw from it and to contact HMRC as soon as possible.  

This latest publication of a tax avoidance scheme promoter comes after HMRC recently used new powers for the first time as part of its Don’t Get Caught Out campaign.  

The named tax avoidance promoter is Peak PAYE Ltd, of 86-90 Paul Street, London, EC2A 4NE.    

By paying contractors National Minimum Wage, and then paying the remainder of the contractors’ wage disguised as a financial option or as a salary advance, this promoter promised its users that they can avoid paying National Insurance and Income Tax.

Mary Aiston, Director of Counter Avoidance, HMRC, said:  

“Tax avoidance schemes are advertised as clever ways to pay less tax when in reality, they rarely work as the promoters promise, and it is the users that end up with big tax bills.  

“Naming tax avoidance promoters is one of the many steps we are taking to disrupt and drive scheme promoters out of business. We want to help ensure customers do not get caught out by tax avoidance.” 

HMRC has now published the details of three tax avoidance schemes and their promoters and will continue to add to this list in the coming months. This is not a complete list of all tax avoidance schemes currently being marketed or a complete list of all promoters, enablers, and suppliers. HMRC recommends steering clear of all avoidance schemes.  

HMRC also recently secured wins in two separate tribunal cases against the tax avoidance firm AML Tax (UK) Ltd, part of the Knox Group. AML Tax (UK) Ltd was successfully challenged over its refusal to provide details of three avoidance schemes, which follows a £150,000 fine for not providing HMRC with required information. 

While one tribunal said that evidence provided by director Arthur Lancaster was ‘inconsistent with the documentary evidence’ and ‘disingenuous’, both lower-tier tribunals ruled AML Tax (UK) Ltd should have disclosed the details of three tax avoidance schemes they promoted, and they could not appeal these decisions.  

HMRC’s Tax Avoidance – Don’t Get Caught Out campaign offers a range of tools to customers to help them steer clear of avoidance schemes, such as the interactive risk checker, payslip guidance, and case studies demonstrating the risks of becoming involved in a tax avoidance scheme and the warning signs customers should look out for.   

Customers who believe that they are involved in a tax avoidance scheme are advised to contact HMRC as quickly as possible by calling 03000 534 226. HMRC is also urging customers who have been encouraged to get into a tax avoidance scheme or have come into contact with someone selling tax avoidance schemes to report these to HMRC. 

The above statement from HMRC ignores the fact that tax avoidance is legal!

Tax does have to be taxing.

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Government Owes HMRC £263M

It seems that Whitehall departments owe HMRC £263M in unpaid taxes after the Government failed to comply with its own rules for off-payroll workers.

The Public Accounts Committee has lambasted central Government for "widespread non-compliance" with so-called IR35 rules, which require companies to determine the tax status of freelancers and contractors.

Public sector departments owed HMRC £236m in back-taxes for workers wrongly assessed as self-employed for the tax year 2020-21, the committee estimated.

It is quoted by the Telegraph:

"Such widespread non-compliance is not acceptable, particularly as government bodies should be best placed to understand the rules and communicate with HMRC."

HMRC had exacerbated the the situation by "rushing implementation" of the IR35 rules and providing "poor guidance" with no means of appealing a tax status for workers. 

The Public Accounts Committee accused HMRC of having done "little to understand the wider impact of the reforms on workers or labour markets" and warned the taxman had been "too dismissive" of people and businesses reported being adversely affected by the rules. 

Dame Meg Hillier, Labour MP and chairwoman of the committee, said: 

"After years of fiddling with these reforms and with central government spending hundreds of millions of pounds to cover tax for individuals wrongly assessed as self-employed, the fundamental problems underlying UK taxation of work remain.

It is now up to HMRC to demonstrate that the system can work fairly in the real world; to prove that it is correctly claiming revenues under the system and that the additional revenues raised are worth the costs and unintended consequences in the labour market.

While workers in the gig economy have challenged their work and tax status in the courts, there is no recourse for workers deemed subject to IR35 tax rules despite the confusion and non-compliance that persist even in central government itself."

If a contractor or freelancer believes they have been given the incorrect tax status by a hiring company, they can challenge the decision with the business. The company must respond within 45 days, but if it refuses to change its mind the worker has no further route to appeal. 

HMRC said: 

“These reforms have succeeded in making the tax system fairer, with more people who work like employees paying tax like employees, levelling the playing field for everybody else and bringing in the tax that is due under the law."

In other words HMRC isn't listening!

Tax does have to be taxing.

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Good Question!

 

I'm puzzled as to why HMRC do not start Making Tax Digital for Income Tax with VAT registered Sole Traders

They will already be keeping digital records and can test out the process before it hits those at a much lower turnover threshold

Just a thought ....

— CheapAccounting.co.uk & TaxBootCamp.co.uk (@cheapaccounting) May 24, 2022

Tax does have to be taxing.

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• Attend any meeting with HMRC
• Appeal to the First-tier Tribunal or Upper Tribunal
• Having the security of knowing that fees will be met in full will enable your Accountant (your tax return agent) to defend your position robustly

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Farewell Online P11D

 

HMRC’s April Agent Update directed advisers to a section in the February 2022 Employer Bulletin entitled Decommissioning of HMRC’s Online End of Year Expenses and Benefits Service April 2022. 

This advised that the interactive PDF service, commonly used by small and medium-sized employers, would not be available for use for 2021/22 submissions.

Employers who previously relied on the online End of Year Expenses and Benefits service need to consider their options now that the online form is not available for tax year 2021/22 and onwards. If the news has come as a surprise, it may be worth starting with a summary of what the service allowed:

• Interactive PDF capability enabling small to medium-sized employers (up to 150 employees) to create P11D forms for their employees
• The capability to create, send and amend P11D and P11D(b) forms electronically or for printing and posting
• The facility to create and submit a ‘Nil P11D(b)’, essentially saying to HMRC that there is no Class 1A National Insurance liability.

Payroll managers will know that tax year 2021/22 is not totally complete until employers have completed all of their P11D returns and made submissions to HMRC. This annual process includes the submission of form P11D(b) and payment of Class 1A National Insurance Contributions.

There are now only two ways for employers of any size to report and submit details of expenses and benefits for tax year ending 5 April 2022: via payroll software (depending on functionality) and HMRC’s PAYE Online service (for submissions up to 500 employees).

Good luck!

Tax does have to be taxing.

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A Solar Protect policy will enable your accountant (your tax return agent) to:

• Deal with any correspondence from HMRC
• Attend any meeting with HMRC
• Appeal to the First-tier Tribunal or Upper Tribunal
• Having the security of knowing that fees will be met in full will enable your Accountant (your tax return agent) to defend your position robustly

Please click here for details.

HMRC Is Shite (www.hmrcisshite.com), also available via the domain www.hmrconline.com, is brought to you by www.kenfrost.com "The Living Brand"