HMRC has published corrected figures that show the tax gap for the 2019-20 tax year is 5.2% (reduced from 5.3%). The error was due to an overestimation of the Corporation Tax gap in both 2019-20 and 2018-19. The tax gap is basically the difference between the amount of tax due and the amount of tax collected by the Exchequer. The gap includes tax that has been avoided in the UK’s black economy, criminal activities and through tax avoidance and evasion.

The key findings from HMRC’s Measuring the Tax Gap publication include:

• The UK tax gap in 2019-20 is estimated to be £34.8 billion. This is 5.2% of total theoretical tax liabilities. This means in 2019-20, HMRC secured 94.8% of all tax due.
• There has been a long-term reduction in the overall tax gap, from 7.5% in 2005-06 to 5.2% in 2019-20. Between 2016-17 and 2019-20, the overall percentage tax gap has remained low.
• The tax gap for Income Tax, National Insurance Contributions and Capital Gains Tax (IT, NICs and CGT) is 3.5% in 2019-20 at £12.6 billion and represents the biggest share of the total tax gap by type of tax.
• There has been a long-term reduction for the VAT (Value Added Tax) gap from 14.1% in 2005-06 to 8.4% in 2019-20.
• The Corporation Tax gap has reduced from 11.3% in 2005-06 to 7.2% in 2019-20.
• The avoidance tax gap has reduced from £4.7 billion in 2005-06 to £1.5 billion in 2019-20.

HMRC’s next ‘Measuring tax gaps’ publication, is planned for publication on 23 June 2022.

Source: New feed