HMRC

HMRC reveals tax remains steady at £32bn

Failure to take reasonable care, criminal attacks, non-payment and evasion were among the main reasons for the tax gap in 2020/21 in terms of behaviour.

HM Revenue and Customs (HMRC) has revealed the estimated tax gap, the difference between the total amount of tax expected and that which is actually paid, for the FY21 was £32bn. 

The tax group is the second lowest recorded percentage – and is unchanged from the previous year.

At 5.1%, there has been no change in the percentage tax gap compared to the previous year, however, HMRC said the monetary value has fallen by £2bn from £34bn in the 2019/20 tax year.

Failure to take reasonable care, criminal attacks, non-payment and evasion were among the main reasons for the tax gap in 2020/21 in terms of behaviour.

Small businesses were responsible for nearly half of the tax gap, at around £15.6bn, according to HMRC’s data.

Criminals accounted for £5.2bn of the gap, while medium-sized businesses made up £3.9bn and large businesses accounted for £3.6bn.

Individuals accounted for £2.5bn of the overall tax gap, with wealthy customers accounting for £1.5bn, according to the figures, which were rounded.

The tax gap for income tax, national insurance contributions and capital gains tax was £12.7bn in 2020/21.

VAT accounted for the second biggest amount of the total tax gap, at £9bn. Corporation tax accounted for £5.6bn of the gap, while excise duties made up £3.5bn.

Around 4% of the tax gap involved “other taxes”, covering a range of levies including customs duty, insurance premium tax and inheritance tax.

HMRC also revealed the total tax due to be paid fell from £672bn in 2019/20 to £635bn in 2020/21, due to the economic impact of Covid-19.

HMRC said some uncertainty for the tax gap estimates for the first year of the pandemic and estimates could be subject to revisions in future years.

Jonathan Athow, director general for customer strategy and tax design at HMRC, said: “The vast majority of taxpayers and businesses paid the correct amount of tax owed.  We want to help everyone to get their tax right as the revenue we raise helps fund our vital public services.”

HMRC said there has been a long-term reduction in the overall tax gap, from 7.5% in 2005/06, to 5.1% in 2020/21. The statistics excluded estimates of error and fraud in the Covid-19 support schemes.

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