HMRC are always pushing to close the tax gap, but it appears they are getting closer. A report from NAO has recently shown that in 2018-19 HMRC received a record tax revenue of £627.9 billion.
Simply put, the tax gap is the tax revenue of HMRC compared to what it is actually owed. There are always taxpayers looking to dodge a bill or avoid it completely. Some taxpayers just happen to not take the best care and as a result, do not pay their tax when they should.
Non-compliance is a big part of HMRCs strategy to bring in as much tax as possible, their goal being to close the tax gap completely.
The best way seen to prevent non-payers in the first place is to apply the following tactics:
HMRC wish to implement compliance into systems and processes to begin with. This enables taxpayers to correctly pay what is owed in the first place.
With today’s systems, it is entirely possible to spot mistakes early using data. This will help to prevent fraudulent claims, personalise online services and automate tax calculations so that nothing can be missed.
HMRC will look to identify and target the key areas of risk. In doing this, it will be possible to prevent taxpayers who look to avoid their payments and cheat their way through the system.
HMRC’s most recent estimate of the percentage of tax to be collected from that which was theoretically owed for 2018-19 was 4.7%. This would be an outstanding amount of around £31 billion of uncollected tax.
By running their strategy of promoting compliance and preventing non-compliance, HMRC has successfully decreased the tax gap to a record number for 2018-19.
Their tax revenue of £627.9 meant an increase of £22.1 billion, which was a 3.6% increase on that collected in 2017-18.
Almost 1 million late filing penalties were imposed by Companies House in January 2020.
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