UK tax gap at lowest on record
THE tax gap – the difference between what should be paid in theory and the amount actually received – has narrowed to the lowest rate on record, according to HM Revenue and Customs (HMRC).
There has been a long-term downward trend in the tax gap, falling from 7.5 per cent in 2005/06 to 4.7 per cent in 2018/19, its lowest recorded rate, the revenue body said.
It means that more than 95 per cent of the tax due was paid in 2018/19.
In cash terms, the tax gap is estimated to be £31 billion. HMRC collected £628 billion in tax revenue in 2018/19.
The tax gap arises for several reasons. Some taxpayers make errors in calculating the tax they owe, while tax evasion and criminal behaviour also plays a part.
HMRC said it would be impossible to collect every penny owed – for example, it cannot collect outstanding tax from businesses that become insolvent. For the first time, a tax gap for wealthy taxpayers was also included in the report. The total wealthy tax gap stands at £1.7 billion.
A wealthy customer is defined as someone with an income of more than £200,000 or assets of over £2 million.