The tax gap

Brought to you by the same people who couldn't work out if Virgin Trains or First Group could run the West Coast line the cheapest! Does make you wonder how they figured out how much tax they didn't get? Also if they could work out the figure with any accuracy, why didn't they go and get it?

HMRC has issued its estimate of the UK tax gap for 2010/11 - a staggering £32bn – some 6.7% of tax due, compared to 7.1% in 2009/10.

Calculated from 30 separate estimates for different taxes, HMRC said the deficit was down to a combination of “tax evasion and avoidance, as well as customer error, the hidden economy, criminal attacks and where tax cannot be collected because businesses have become insolvent”.

Exchequer Secretary David Gauke MP said: ‘These tax gap figures show that the vast majority of people and businesses pay the tax they owe on time. Last year £468.9bn was collected, including £13.9bn brought in through HMRC’s work policing the rules.

‘Every pound of tax that is not collected puts a greater burden on honest taxpayers and public services, so the Government and HMRC will continue to work together to make it harder for individuals and businesses not to pay the taxes that are due.

‘We are determined to reduce the tax gap and have made £917 million available to help HMRC tackle avoidance and evasion.’

HMRC’s tax gap estimates go back to 2004/5 and are regularly revised to factor in improved the latest available information, some of which has long time delays due to lengthy tax settlements. The latest figures include downward revisions by the Office for National Statistics that influence the VAT tax gap. The gaps expressed as a percentage of liabilities has now declined from 8.2% in 2004/5 to 6.7% in 2010/11, it said.

Lin Homer, HMRC’s chief executive, said: ‘Our determination to support the honest majority and to crack down on evasion, avoidance and fraud have kept downward pressure on the tax gap. We are determined to do more and we are devoting increasing resources to pursuing those who do not pay the tax they owe, while making it easier for people and business to comply with their tax obligations.’