Responding to the tax gap figures released by HMRC today (Thursday 20 June 2024) Lindsey Wicks, ICAEW Senior Technical Manager, Tax Policy, said:
“The small decrease in the tax gap in percentage terms is positive news, although in cash terms it has increased. The tax gap has been stubbornly hovering around the 5% level for the past six years, which may indicate that making significant inroads to reducing it from its current level is becoming increasingly challenging.
“In terms of behaviour, avoidance is the smallest proportion of the tax gap at 4%. The increase in the gap relating to non-payment from 9% in 2021/22 to 13% in 2022/23 likely reflects changing economic circumstances.
“While the gap for most taxes as a percentage of total theoretical tax liabilities has generally been on a downward trend over time, there has been a significant uptick for corporation tax since 2018/19. The share of the tax gap attributable to small businesses has also been rising over that period. The challenge facing HMRC and the government is to enable and encourage greater compliance without increasing administrative burdens and costs for small businesses.”
“While HMRC’s tax gap report is a very useful tool to help inform decision making, we would encourage anyone using the data to take care when interpreting it, particularly as the figures are updated as more information becomes available.”
ENDS
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