News story

HMRC publishes 2012 to 2013 tax gap

The tax gap, which is the difference between the amount of tax due and the amount collected, was 6.8% of tax liabilities, or £34 billion, in 2012 to 2013.

This was published under the 2010 to 2015 Conservative and Liberal Democrat coalition government

Photo of an inside page of the HMRC report 'Measuring tax gaps - 2014 edition'

This compares with a revised estimate of 6.6% in 2011 to 2012. The long-term trend is downward, with the tax gap falling from 8.5% in 2005 to 2006, HM Revenue and Customs (HMRC) confirmed today.

Financial Secretary to the Treasury David Gauke said:

Since 2010 to 2011 the percentage tax gap has stayed lower than at any point under the previous government, saving the country £4 billion. Today’s figures show that there’s still more work to do but our continued drive to tackle avoidance means that avoidance is down.

In 2012 to 2013 HMRC achieved a compliance yield of £20.7 billion, rising to a record breaking £23.9 billion in 2013 to 2014.

The UK has one of the lowest tax gaps in the world but HMRC will continue to deploy its resources and skills to maintain the downward pressure that has proved so effective in recent years.

The tax gap also includes the tax owed by companies that have become insolvent – making it uncollectible, as well as low level errors made in tax returns. The part of the gap due to tax avoidance fell from £3.4 billion to £3.1 billion.

The tax gap overall shows a downward trend from 8.5% in 2005 to 2006 (the first year it was compiled) to 6.6% in 2011 to 2012 (revised down from 7% in last year’s publication) and 6.8% in 2012 to 2013.

Since 2005 to 2006, this fall from 8.5% to 6.8% has delivered an additional £43 billion in cumulative tax collected.

The key impacts on the 2012 to 2013 tax gap came from VAT and illicit tobacco, but provisional data for 2013 to 2014 suggests the VAT gap is falling back to earlier levels.

Since 2000, HMRC has reduced the illicit cigarette market by around 40% and, as part of HMRC’s 2010 Spending Review settlement, additional funding was made available to tackle illicit tobacco. Last year some 328 people were prosecuted, £518.3 million revenue losses prevented and over 1.4 billion illicit cigarettes seized together with 330 tonnes of hand rolling tobacco.

Published 16 October 2014