Tax Gap £33BN

The tax gap slightly increased to £33bn (5.7%) in 2016/17, up from the previous year's revised figure of 5.7% (£32bn). This year, despite the gap increase, the percentage remained at 5.7%.

The tax gap is the difference between the amount of tax that should be paid to HMRC and what is actually paid.

HMRC note that 41% of the tax gap came from small businesses. The group is responsible for an overall gap of £13.7bn. Large businesses accounted for a further £7bn.

The majority of the tax gap came from failing to pay income tax (IT), national insurance contributions (NICs) and capital gains tax (CGT), amounting to a total of £13.5bn. Unpaid value added tax also contributed £11.7bn to the tax gap and corporate tax added £3.5bn.

The tax gap was driven by failure to take reasonable care (£5.9bn), by criminal acts (£5.4bn), tax evasion (£5.3bn), legal interpretation (£5.3bn), non-payment (£3.5bn), error (£3.2bn), hidden economy (£3.2bn) and finally tax avoidance (£1.7bn).

In other words, despite government and HMRC BS, avoidance is not the key issue!

Catherine Robbins, partner at Pinsent Masons, is quoted in economia:

“Very few businesses are engaged in tax avoidance schemes now and as HMRC hunts for new sources of revenue, it is increasingly coming down hard on basic, almost routine errors.”

Basically HMRC will go after low hanging fruit, ie:

- SME's
- Individual taxpayers

Tax does have to be taxing.

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