The amount of tax that went uncollected in 2009-10 was £35bn, down £4bn from the previous year, according to the latest estimate of the UK “tax gap” published by HMRC.
The total tax gap – the difference between the tax HMRC thinks should be collected and the amount actually collected – accounts for about eight per cent of total revenues. This figure is is at the “lower end of the range” of countries who publish their tax gaps, HMRC said.
The fall in uncollected tax is mainly due to a reduction in the “VAT gap” since 2008-09 following the reduction in the standard rate of VAT from 17.5% to 15% between 1 December 2008 and 31 December 2009, HMRC said.
Closing the tax gap is a priority for the government. In last year’s Spending Review Chancellor George Osborne said it would allocate £917m of funding to HMRC to help target tax avoidance and raise additional revenues of £7bn a year by 2014/15, while chief secretary to the Treasury Danny Alexander, at this week’s Lib Dem conference spoke of the coalition government's
plan to crackdown.
David Gauke, exchequer secretary, said: “Although these numbers show continued progress by HMRC in reducing the tax gap, there is no room for complacency. Just in the last few weeks we have challenged offshore tax evaders, closed tax avoidance loopholes and created a new HMRC unit to ensure that the wealthier members of society pay their way.”
“We will continue to take action to prevent a minority of rule breakers dodging their responsibility to pay the right tax at the right time.”
Richard Mannion, national tax director at Smith & Williamson, the mid-tier accountant, said he expected HMRC’s tax gap figure to fall further over the coming years as tax deals such as between
Switzerland and the UK and the Liechtenstein Disclosure Facility catch tax avoiders in a “pincer move.”
In the UK, tighter rules on disclosing tax avoidance scheme to HMRC - Disclosure of Tax Avoidance Schemes
introduced in 2004 - has given tax investigators early warning of avoidance schemes and been a big help in reducing uncollected tax, Mannion said.
Heather Self, director in the tax practice at law firm McGrigors, said: ““HMRC needs to ensure that in trying to narrow the tax gap it does not trample on innocent taxpayers. HMRC has become more error-prone and heavy-handed in some respects over the last few years. My fear is that the pressure on HMRC to reduce evasion and avoidance may prompt it to adopt a blunderbuss approach.”