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The 2012/13 tax gap was £34bn, or 6.8% of tax liabilities, according to newly released HMRC figures, which show a small rise on the £33bn (6.6%) in the previous year (revised down from an initial £35bn).
The 2012/13 tax gap was £34bn, or 6.8% of tax liabilities, according to newly released HMRC figures, which show a small rise on the £33bn (6.6%) in the previous year (revised down from an initial £35bn).
| % | £bn | |
| Criminal attacks | 16 | 5.4 |
| Hidden economy | 17 | 5.9 |
| Legal interpretation | 13 | 4.5 |
| Evasion | 12 | 4.1 |
| Avoidance | 9 | 3.1 |
| Non-payment | 13 | 4.4 |
| Lack of reasonable care | 12 | 4.2 |
| Error | 8 | 2.9 |
The main reason for the increase in the amount – the theoretical difference between money collected by the authorities and the higher sum the tax system is expected to generate – was growth in both the VAT gap (£0.9bn) and the tobacco gap (£0.3bn).
Phil Berwick, contentious tax expert at law firm Irwin Mitchell, urged the Revenue to increase its efforts to recover tax the £15.4bn estimated to have been lost to unlawful behaviour.
“HMRC should be allocating their resources to target taxpayers who are suspected of illegal activity, including criminal attacks and evasion. That is likely to have a greater impact on the tax gap than relentlessly pursuing those suspected of avoidance, which accounted for £3.1bn,” he said.
The Chartered Institute of Taxation has “long argued that the tax department needs to put more effort into investigating and prosecuting those who seek to evade tax”, said the organisation’s tax policy director, Patrick Stevens.
He added, “The figures show how much is being lost to public funds as a result of errors and carelessness by taxpayers: more than £7bn a year. HMRC are still not doing enough in this area.
“There should be a stronger focus on education and on making it easier for people to complete their returns. Additional simplification measures would also help reduce mistakes, as well as making avoidance more difficult.”
