Times change. And so do people. Or at least that is what HMRC is trying to show with the latest ‘Tax Gap’ statistics released a few days ago.
The Tax Gap, the difference between actual tax receipts and the theoretical tax burden, for the 2021/22 year was around £35.8bn, or roughly 5% of total theoretical liabilities. Put another way, HMRC collected around 95% of what they were hoping to do so.
However, behind these headline figures are some interesting pointers, especially when compared to a few years ago. The two pie charts below compare the behavioural changes generating the Tax Gap. Whilst the absolute Tax Gap has not changed too much, increasing by around 5% from £34bn in 2015/16, the causes are quite different.
Seven years ago, around 40% of the loss was derived from criminal attacks, tax evasion and the hidden economy. In the intervening period, this has dramatically fallen by around 10%.
Whilst that may sound good news, this fall has been matched in two specific areas that could impact you. Firstly, instances of carelessness have increased by 12%, now accounting for just under 1/3rd of the entire Tax Gap. Similarly, identified errors in tax returns have increased by around 50% over the last 7 years and now account for around 15% of the Tax Gap.
Compared to criminal activity and the hidden economy, HMRC may regard known visible taxpayers as easy targets and therefore, the risk of being charged a penalty for errors made, especially where careless, could be greater than ever before.
The Xeinadin Tax Team is here to protect you by ensuring the approach to tax returns and HMRC penalties is de-risked as far as possible. Contact us if you’d like to know more.
