{"id":19560,"date":"2019-07-18T11:35:50","date_gmt":"2019-07-18T11:35:50","guid":{"rendered":"https:\/\/smh.group\/?p=19560"},"modified":"2023-02-15T13:45:14","modified_gmt":"2023-02-15T13:45:14","slug":"getting-to-grips-with-the-tax-gap","status":"publish","type":"post","link":"https:\/\/devstagesite.co.uk\/smhgroup\/getting-to-grips-with-the-tax-gap\/","title":{"rendered":"Getting to grips with the tax gap"},"content":{"rendered":"\n

HMRC did not collect 5.6% of the tax revenue\ndue for 2017\/18 according to its annual report on the tax gap. And the biggest\nincrease in shortfall was from smaller businesses and individuals.<\/strong><\/p>\n\n\n\n

The \u00a335bn missing from expected tax\nreceipts is a new record in cash terms, with an increase of \u00a32bn on the\nprevious year. Tax evasion and criminal activity together with small businesses\nfailing to pay are the main culprits.<\/p>\n\n\n\n

Some analysts believe the figure to be much\ngreater since the figures do not include profit shifting by large\nmultinationals, such as Apple or Google, or the hidden economy. What the report\ndoes show, however, is a particular shortfall of \u00a314bn from smaller firms which\nis almost double that of larger companies. <\/p>\n\n\n\n

Closer analysis reveals a steep rise in the\namount of unpaid self-assessment tax. A total of \u00a37.4bn was not collected, up more\nthan 10% on the previous year. At the same time the PAYE tax gap improved\nmarginally, down from 1.1% to 1%. For income tax, National Insurance contributions\nand capital gains tax, the overall figure was \u00a312.9bn or 3.9% of all potential\nliabilities. <\/p>\n\n\n\n

A combination of tax complexity and an\nunder-resourced HMRC appear to underlie the figures. Fewer random audits have\nbeen carried out in recent years, while the number of targeted audits, which\nhave been shown to bring in up to four times their cost to carry out, have also\ndecreased. Staff redeployed to focus on Brexit issues has also contributed to\nresourcing issues.<\/p>\n\n\n\n

One interesting contributory explanation is\na figure of \u00a36.2bn of tax lost due to differing \u201clegal interpretation\u201d of tax\nrules between the Revenue and taxpayers. With some recent high-profile cases\naround IR35 going against HMRC\u2019s interpretation of its rules, there are\nincreased calls for simplification and clarity. <\/p>\n\n\n\n

HMRC is the only tax authority to publish estimates of uncollected taxes. However, they are only estimates, and the methods used to calculate them have been questioned. But with the published tax gap figures apparently equivalent to the housing and environment budget, or the public order and safety budget (depending on which reports you read), the problem goes beyond HMRC\u2019s issues to the heart of the compact between taxpayers and society. <\/p>\n\n\n\n

To discuss your tax planning<\/a><\/span><\/strong> with one of our Accounting & Business Advisory<\/a><\/span><\/strong> drop us a line on 0114 266 4432<\/strong> or info@smhca.co.uk<\/a><\/span><\/strong>.<\/p>\n","protected":false},"excerpt":{"rendered":"

HMRC did not collect 5.6% of the tax revenue due for 2017\/18 according to its annual report on the tax gap. 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