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HMRC figures show UK tax gap has widened

17 Oct 2014

The tax gap – the difference between tax that should have been collected and what was actually collected – was £34 billion in the year to April 2013, an increase of £1bn from the year before, according to a new report by HM Revenue & Customs (HMRC).

This represents 6.8% of total tax liabilities, which HMRC insists is part of a downward trend, falling from an 8.5% high in 2005/6.

A breakdown of the total sum shows that most of the gap (£15.1 billion) was attributable to SMEs, with large business close behind (£9.3 billion).

When grouped by tax type, the figures show that income tax, national insurance and capital gains tax accounted for £14.2 billion of the gap – while the amount of uncollected VAT was £12.4 billion.

HMRC blamed the rise on criminal fraud, and people making mistakes on their tax returns. ‘Aggressive’ tax avoidance schemes are not included in the figures.

The rise comes despite HMRC being given extra resources to collect more in tax. Shabana Mahmood, Labour’s shadow exchequer secretary to the Treasury, said: ‘These damning figures show that this government is totally failing to tackle tax avoidance and evasion.’

David Gauke, Financial Secretary to the Treasury, said: ‘Since 2010/11 the percentage tax gap has stayed lower than at any point under the previous government, saving the country £4 billion.

 ‘The UK has one of the lowest tax gaps in the world but HMRC will continue to deploy its resources and skills to maintain the downward pressure that has proved so effective in recent years.’