HMRC has claimed its plan to tackle non-payment of tax is working, as figures reveal that the estimate of the UK’s tax gap – the difference between the tax due and that collected by – fell to a new low of 6% in 2015-16.
According to figures published last week, the tax authority announced that the percentage of unclaimed revenue was down 0.1 percentage point from 2014-15, although it increased slightly in cash terms (from £33bn to £34bn).
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In the decade since 2005-06 HMRC has reduced the tax gap from a high of 7.9%, the figures indicate, although the gap has remained nearly unchanged in cash terms. It stood at £35bn in 2005-06.
HMRC said the percentage tax gap provides a better measure of compliance over time, because it takes account of some of the effects of inflation, economic growth and changes to tax rates.
According to government analysis, if the gap had remained at the 2005-06 level in percentage terms, it would have grown to £46bn and the country would have been nearly £12bn a year poorer.
Publishing the updated figures last week, Jim Harra, HMRC’s director general, customer strategy and tax design, said a suite of reforms, including cracking down on avoidance by multinationals and boosting HMRC’s compliance function, were working.
Since 2010, HMRC have secured almost £160bn in additional tax revenue through enforcement action, including £2.8bn from offshore tax evaders, he stated.
“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. Measuring the tax gap gives us vital insights into where to direct our efforts, and tells us that our strategy is succeeding.”