Tax gap reduced

16 October 2014

HM Revenue and Customs (HMRC) have published their estimate of the tax gap (tax which is due but not collected) for 2012-13, showing a further fall from the high levels published for earlier years.

The HMRC report shows that the tax gap, which is the difference between the amount of tax due and the amount collected, was 6.8 per cent (or £34 billion) of total tax duties due during 2012-13. This shows a continued overall long-term downward trend from 8.5 per cent in 2005-6 – the first year the tax gap was compiled – to 6.6 per cent in 2011-12, rising marginally to 6.8 per cent in 2012-13. Over the seven years since 2005-06, the fall in the tax gap translates into an additional £43 billion in cumulative tax collected.

Looking at findings of particular relevance to payroll professionals, the report shows that:

· The 2012-13 employers tax gap of £3.4 billion is equivalent to 1.5 per cent

· of employer PAYE liabilities, and

· The proportion of small and medium sized employers failing to correctly operate their PAYE scheme has decreased from 41 per cent in 2005-06 to 23 per cent in 2011-12.

A tax gap briefing, setting out more detail on why and how HMRC measure the tax gap, and how they will continue to tackle it in the future, has also been published.