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HMRC reveals ‘tax gap has widened to £42bn’

The shortfall between the amount of tax owed to HM Revenue and Customs (HMRC) and that actually paid, increased to an estimated £42 billion in 2008/09.

In a new report, HMRC states that the tax gap was £4bn higher than that recorded in 2007/08, when it totalled £38bn.

The biggest loss was in VAT, where £15.2bn of all the potential tax went uncollected. The Revenue also failed to cash in on a further £2.5bn in duty owed on cigarettes, tobacco, beer and spirits, the report revealed.

Inaccurate self-assessment returns are thought to have led to a £5.8bn loss in income tax, while inaccurate PAYE returns resulted in £3.2bn of tax going uncollected.

The news follows the revelation that some 2.3 million people have underpaid income tax in the last two years due to errors in their PAYE tax code, with individuals owing an average of £1,428 each.

 

HMRC is now writing to those individuals affected in an effort to recoup the unpaid tax.

‘The Revenue is making progress and UK tax authorities are doing quite well compared to other countries,’ said John Whiting of the Chartered Institute of taxation (CIOT).

‘But there is more to be done, especially in deciding if the estimates of how much VAT should be collected are right in the first place.’