HMRC has reported its latest tax gap estimates. The difference between the total amount of tax expected to be paid and the total actually paid for the 2020/21 tax year remained at 5.1%, unchanged from the previous year. In actual cash terms, the tax gap was £32bn, some £2bn lower than for the previous tax year but reflecting the economic impact of covid-19 on the total tax take for the period.
Tax consultant and former CIOT president, Ray McCann, said that HMRC deserves credit for the effort it has made, but 'what has mystified me is that despite tough new laws, despite HMRC’s aggressive investigation approach, despite the litigation strategy, despite the huge compliance yield numbers, the nominal total tax gap hardly changes: it was £34bn in 2004, whereas it is £32bn now.'
'But the tax gap is annualised,' McCann added. ‘If the total lost to evasion for example was cumulatively calculated the total tax gap. it would likely be closer to £100bn since the larger part of evaded tax is never collected.’
HMRC’s findings show that small businesses continue to represent the ‘largest proportion of the tax gap by customer group’ at £15.6bn, with failure to take reasonable care the principal behavioural reason behind the tax gap.
Meanwhile, law firm RPC reports that HMRC is clamping down on wealthy taxpayers who fail to file tax returns, with the tax gap for those with income over £200,000 or assets of more than £2m estimated to be £1.2bn in 2020/21 (5% of the total tax gap).
Adam Craggs, head of RPC’s tax disputes group, said: ‘Letters have been issued to those taxpayers who HMRC believes may have failed to declare income or gains, requesting that self-assessment returns be filed by 22 August 2022. Recipients of these letters who take no action may well find that HMRC escalate matters, and they may commence a full scale investigation into their tax affairs.’
The VAT gap for 2020/21 is estimated to be £9bn (7% of the VAT total theoretical liability). HMRC suspects that 208 of the UK’s largest businesses have underpaid VAT by a total of £2.7bn, according to Thompson Reuters, whose analysis suggests that businesses can expect increased investigations activity as HMRC comes under pressure to deliver returns on the £292m of additional investment provided in the 2021 Spending Review to tackle underpayment of tax.
Thomson Reuters reports that ‘technological solutions can help with tax compliance, increasing transparency, reducing human error and enabling real-time reporting’, noting that ‘the vast complexity of VAT and goods and services taxes worldwide means that a multinational corporate that isn’t automating its indirect tax compliance is leaving itself open to errors and investigations’.
HMRC has reported its latest tax gap estimates. The difference between the total amount of tax expected to be paid and the total actually paid for the 2020/21 tax year remained at 5.1%, unchanged from the previous year. In actual cash terms, the tax gap was £32bn, some £2bn lower than for the previous tax year but reflecting the economic impact of covid-19 on the total tax take for the period.
Tax consultant and former CIOT president, Ray McCann, said that HMRC deserves credit for the effort it has made, but 'what has mystified me is that despite tough new laws, despite HMRC’s aggressive investigation approach, despite the litigation strategy, despite the huge compliance yield numbers, the nominal total tax gap hardly changes: it was £34bn in 2004, whereas it is £32bn now.'
'But the tax gap is annualised,' McCann added. ‘If the total lost to evasion for example was cumulatively calculated the total tax gap. it would likely be closer to £100bn since the larger part of evaded tax is never collected.’
HMRC’s findings show that small businesses continue to represent the ‘largest proportion of the tax gap by customer group’ at £15.6bn, with failure to take reasonable care the principal behavioural reason behind the tax gap.
Meanwhile, law firm RPC reports that HMRC is clamping down on wealthy taxpayers who fail to file tax returns, with the tax gap for those with income over £200,000 or assets of more than £2m estimated to be £1.2bn in 2020/21 (5% of the total tax gap).
Adam Craggs, head of RPC’s tax disputes group, said: ‘Letters have been issued to those taxpayers who HMRC believes may have failed to declare income or gains, requesting that self-assessment returns be filed by 22 August 2022. Recipients of these letters who take no action may well find that HMRC escalate matters, and they may commence a full scale investigation into their tax affairs.’
The VAT gap for 2020/21 is estimated to be £9bn (7% of the VAT total theoretical liability). HMRC suspects that 208 of the UK’s largest businesses have underpaid VAT by a total of £2.7bn, according to Thompson Reuters, whose analysis suggests that businesses can expect increased investigations activity as HMRC comes under pressure to deliver returns on the £292m of additional investment provided in the 2021 Spending Review to tackle underpayment of tax.
Thomson Reuters reports that ‘technological solutions can help with tax compliance, increasing transparency, reducing human error and enabling real-time reporting’, noting that ‘the vast complexity of VAT and goods and services taxes worldwide means that a multinational corporate that isn’t automating its indirect tax compliance is leaving itself open to errors and investigations’.
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