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Tax gap remains steady

The tax gap, the difference between the tax that should be paid to HMRC and the actual tax that has been paid, was 5.7 percent for 2016 to 2017, the same as in the previous year.

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The tax gap has steadily reduced since 2005 to 2006 when it stood at 7.3 percent which is the equivalent of £71bn. Today the tax gap amounts to £33bn and is one of the lowest gaps in the world.

 

Mel Stride, Financial Secretary to the Treasury, said: “These really positive figures show that the tax gap is the lowest in the last five years, which reflects the hard work that HMRC and I have been doing to ensure we support businesses to pay the right tax at the right time and clamp down on tax evasion and avoidance.”

 

Key findings from the Measuring the Tax Gap publication include:

  • Small businesses made up the largest proportion of unpaid tax by customer group at £13.7bn;
  • Taxpayer errors and failure to take reasonable care made up £9.2bn of unpaid taxes by behaviour, while criminal attacks made up £5.4bn;
  • Income Tax, National Insurance Contributions, and Capital Gains Tax made up the largest proportion of the tax gap by tax type at £7.9bn for 2016 to 2017, equivalent to 16.4 percent of self-assessment liabilities.

Jon Thompson, HMRC’s chief executive, said: “HMRC is working hard to help taxpayers get their tax right by offering support and investing in digital services to improve businesses’ record keeping and reduce errors.”

 

HMRC said it is working with small businesses to help them get their tax right first time around. The department aims to make sure the tax system is not a barrier to setting up, running and growing a business; which is why the department offers businesses support and provides information, to help businesses start up, sustain and grow.

 

It is also continuing to roll-out Making Tax Digital (MTD) for businesses. Once fully operational, HMRC said MTD will help to reduce the tax gap by helping to prevent error and failure to take reasonable care. Digital record keeping combined with a modern, more automated tax system will help businesses get their affairs right the first time.

 

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