Tax Gap reducing but small business mainly to blame

HMRC says it has reduced the tax gap but claims that the bulk of unpaid tax is owed by small business.

 

The tax gap is the difference between the tax that should be paid to HMRC and the actual tax that has been paid. HMRC's latest figures show that the tax gap has reduced from 7.3% in 2005/06 to an estimated 5.7% in 2016/17 - worth £71 billion in tax revenues.

According to HMRC, small firms are responsible for 41% of the current tax gap, followed by large businesses at 21% and mid-sized firms at 12%. Criminals are responsible for 16% of the gap.

 

HMRC is working with small businesses to help them get their tax right first time around and that it aims to make sure the tax system assists businesses in setting up, operating and growing. Digital record keeping and an automated tax system - with the introduction of making Tax Digital - will help businesses get their tax affairs in order, says HMRC.