Tax & admin · 27 October 2017

HMRC avoidance crackdown leads to record low tax gap

HMRC
75 measures in seven years have been introduced to re-balance the country’s tax gap

The UK’s “tax gap” – the difference between the total tax due and that collected by HMRC – fell to a record low in the last tax year, government statistics have shown.

The tax gap fell to six per cent in 2015 to 2016, HMRC have revealed, as government measures to crack down on tax avoidance, evasion and non-compliance have taken effect.

Over the last seven years, the government has introduced a total of 75 measures in attempts to re-balance the country’s tax gap.

Measures have included cracking down on tax avoiding multinationals, the introduction of new criminal offences for tax evaders and companies that fail to prevent evasion, and investment in new HMRC tax compliance operations.

In a statement, financial secretary to the Treasury and paymaster general, Mel Stride, said: “Today’s data shows how far we have come in tackling avoidance, evasion and non-compliance, but there is still more to do.

“We will continue to take action to ensure that everyone pays the tax they owe. Collecting the right tax is crucial to fund our vital public services.”

Had the tax gap remained at 7.9 per cent – the level it was in the 2005 to 2006 tax year –  the government has claimed that it would have grown by £46bn in the last decade, and the country would be £12bn a year worse off than it is.

HMRC have claimed that since 2010, it has secured nearly £160bn as a direct result of action taken counter tax evasion, avoidance and non-compliance. This figure includes £2.8bn from offshore tax evasion.

The director of customer strategy and tax design at HMRC, Jim Harra, commented: “Measuring the tax gap gives us vital insights into where to direct our efforts, and tells us that our strategy is succeeding.

“HMRC’s online tax accounts and use of data increasingly help people get their tax right and prevent mistakes and fraud. This enables us to focus on tackling those who deliberately pay less than they owe.”

HMRC has promised to invest £800m in new tax compliance operations and processes, which it expects will bring in an additional £7.2bn tax revenue by 2020 to 2021.

 Read more: 60 per cent of self-employed under-report income to HMRC

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ABOUT THE EXPERT

Fred Heritage is deputy editor at Business Advice. He has a BA in politics and international relations from the University of Kent and an MA in international conflict from Kings College London. He previously worked as a reporter at Global Trade Review magazine.

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