Tax gap widens to £34bn
The tax gap has increased to £34bn in the past year according to the latest figure from HM Revenue and Customs (HMRC), but Baker Tilly’s George Bull has said that HMRC are nonetheless “winning the battle” against tax avoidance.
The tax gap in the UK jumped from 6.6% in 2011-12 to 6.8% in 2012-13, but of the various factors contributing to the gap – including low levels errors, company insolvency, tax evasion and avoidance – the number of avoidance schemes has declined over recent years.
HMRC’s figures also show that tax avoidance fell from £3.4bn to £3.1bn in the same year that the tax gap saw a 0.2% increase.
However, Bull , who is senior tax partner at Baker Tilly, said authorities are in a “difficult position” when working out an exact figure for the tax gap because a lot of it comes out of the informal economy, “so no one really knows exactly how big the problem is”.
“Really surprised”
Head of tax services at Edwin Coe, Frank Strachan, said he is “really surprised” that the estimated tax gap percentage has increased when HMRC has invested time and money in order to reduce the figure.
“Based on recent discussions with HMRC where they outlined some of the tools and resources they are putting in to target areas such as the tax gap, I would be staggered if we didn’t see a substantial reduction in tax gap figures over the coming years.
“The appetite for tax avoidance is reducing at all levels, from boardroom to the street, but overall this is a really disappointing result for HMRC.”
This recent figure indicates a reverse in what has been a downward trend in the tax gap, which saw a decrease from 8.5% in 2005-06 to 6.6% in 2011-12, bringing in an additional £43bn in cumulative tax.
But the financial secretary to the treasury, David Gauke, said: “Today’s figures show that there’s still more work to do, but our continued drive to tackle avoidance means that avoidance is down.
“HMRC will continue to deploy its resources and skills to maintain the downward pressure that has proved so effective in recent years.”
