HMRC predicts lowest recorded tax gap rate of £31bn

According to data from the tax authority, the 2018-19 tax gap is the lowest recorded rate, having fallen from 7.5 per cent in 2005-06.

More than 95 per cent of the tax due was paid in 2018-19, or £628 billion, which the HMRC attributes to its “sustained efforts to support the overall health of the tax administration system”.

“At 4.7 per cent, the 2018-19 tax gap is the lowest on record. The coronavirus pandemic has highlighted the importance of everyone playing their part and paying the tax that is due,” said Jesse Norman, Financial Secretary to the Treasury.

“Having a secure and comprehensive tax base is what allows the government to pay for public services, but also to provide financial support in a crisis, at a time when it is most needed,” added Mr Norman.

The HMRC noted that 2018-19 is the first year that a stand-alone tax gap for wealthy taxpayers has been included in the report. The total wealthy tax gap stands at £1.7 billion and represents a very high collection rate of all tax due within this group.

Also commenting on the record low tax gap, HMRC’s chief executive, Jim Harra, said that the tax authority’s aim is for everyone to pay the tax that is due, no matter who they are.

“Our role is increasingly about making it straightforward for taxpayers to get it right, first time, while also tackling the minority who deliberately set out to cheat the system. I’m pleased that we’re now able to share more information about who pays what,” said Mr Harra.

Making Tax Digital (MTD) for businesses launched in April 2019, meaning that businesses with a taxable turnover above the VAT threshold now have to use digital record keeping tools and submit their VAT return data direct from those records using MTD-compatible software.

MTD seeks to reduce the tax gap caused by error and failure to take reasonable care, which cost the Exchequer £8.5 billion in lost revenue in 2018-19.

According to the data from the HMRC, more than 1.4 million businesses have signed up to the service, including around 280,000 businesses below the VAT threshold who have joined voluntarily.