The tax gap for 2016 – 2017 has fallen to 5.7%, HMRC has confirmed. The “tax gap” relates to the tax that should be paid and the actual tax paid to HMRC.

In a statement, Mel Stride, Financial Secretary to the Treasury, said: ‘These really positive figures show that the tax gap is the lowest in the last five years, which reflects the hard work that HMRC and I have been doing to ensure we support businesses to pay the right tax at the right time and clamp down on tax evasion and avoidance.’

She added, ‘Collecting taxes is essential for funding our vital public services such as the NHS. Indeed, had the tax gap remained at its 2005/06 level the UK would have lost £71 billion in revenue destined for public services, enough to build 200 hospitals.’

It is understood that HMRC considers the improvement to be linked to the department’s sustained efforts to tackle evasion and avoidance. From the findings in the Tax Gap publication, it was noted that small businesses made up the largest proportion of unpaid tax of £13.7 billion.

Additional findings include:

  • 9.2 billion of unpaid taxes were due to errors and failure to take reasonable care.
  • £5.4 billion made up by criminal attacks.
  • £7.9 billion from income tax, national insurance contributions, and capital gains tax, equivalent to 16.4% of self assessment liabilities.
  • The VAT gap indicates an improving trend, falling from 12.5% in 2005/06 to 8.9% in 2016/17.