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Tax gap shrinks but we shouldn’t become complacent

Tax gap shrinks but we shouldn’t become complacent

The tax gap shrunk slightly to £35 billion over the last 12 months, according to the latest data from HMRC.

In the financial year 2009-10, the amount of tax that remained uncollected due to tax avoidance and evasion was 7.9%, down 0.2 percentage points on the previous year. Whilst this might sound like a lot, it is actually lower than a lot of countries who publish tax gap data.

David Gauke, the exchequer secretary to the Treasury, said that HMRC continues to show good progress in closing the tax gap, but we must not become complacent. Over the last few weeks offshore tax evaders have been challenged, tax avoidance loopholes closed and a new unit set up to make sure the UK’s richest individuals pay the tax they owe.

However, some tax experts say it is difficult to get a realistic assessment of the size of the problem because HMRC uses tax figures that are four years old in its calculations.

Heather Self, from McGrigors, said that calculating a tax gap for VAT was simple, but when it comes to direct taxes like corporation tax and income tax, it’s a different story.

She went on to say that the Revenue must make sure it does not trample on innocent taxpayers. Over the last few years, HMRC has made some errors and become more heavy-handed and she is concerned that the added pressure to reduce the tax gap may see it adopting a blunderbuss approach.

HMRC loses £6 million a year due to simple errors and carelessness on the part of taxpayers, according to the CIoT. This news led the Institute to recommend all small businesses seek professional help when it comes to bookkeeping.

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Image: SIze conspiracy by sporkist

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