Official Statistics

6. Tax gaps: Other taxes

Updated 22 June 2023

Other taxes, levies and duties

Summary

The ‘other taxes’ gap is estimated using 6 components:

• Stamp Duty Land Tax gap, based on an experimental methodology using receipts, avoidance, and reliefs data

• Stamp Duty Reserve Tax gap, based on an experimental methodology using receipts data

• Inheritance Tax gap, based on an established statistical extreme value methodology which assumes that there is a small number of very high yielding compliance cases and many low yielding cases

• Petroleum Revenue Tax gap estimates between 2005 to 2006 and 2014 to 2015. This is not estimated from 2015 to 2016 as it was permanently zero rated from 1 January 2016

• Landfill Tax gap, based on an experimental methodology using receipts, data on unauthorised waste sites and compliance

• ‘Other taxes, levies and duties’ gap: this includes Aggregates Levy, Air Passenger Duty, Climate Change Levy, Custom Duty, Digital Services Tax, Insurance Premium Tax and Soft Drinks Industry Levy. The other taxes, levies and duties gap is based on an experimental methodology using a weighted average of the overall tax gap

To evaluate the uncertainty of our ‘other taxes’ gap, we assign an uncertainty rating for each component, ranging from ‘very low’ to ‘very high’. The estimate for Landfill Tax gap has ‘high’ uncertainty. The estimates for the Stamp Duty Land Tax gap and the Inheritance Tax gap estimate have ‘medium’ uncertainty. The Stamp Duty Reserve Tax gap and ‘other taxes, levies and duties’ gap estimates have ‘very high’ uncertainties.

Figure 6.1 shows the ‘other taxes’ gap time-series in absolute terms and relative to theoretical ‘other taxes’ liabilities.

The ‘other taxes’ gap is estimated to be 3.6% of the theoretical ‘other taxes’ liabilities, or £1.5 billion in absolute terms, in the 2021 to 2022 tax year.

There has been a gradual reduction in the ‘other taxes’ gap from 4.0% in 2005 to 2006 to 3.6% in 2021 to 2022, with some fluctuations in the intervening years.

Figure 6.1: ‘Other taxes’ gap by value and as a percentage of theoretical tax liability, 2005 to 2006 up to 2021 to 2022

Notes for Figure 6.1

1. The full data series can be seen in the online tables.

Figure 6.2 shows the tax gaps for the ‘other taxes’ gap components: Stamp Duty Land Tax, Stamp Duty Reserve Tax, Inheritance Tax, Petroleum Revenue Tax, Landfill Tax and ‘other taxes, levies and duties’. The estimate for Landfill Tax gap as a proportion of theoretical tax liabilities is the highest across the time series since the 2014 to 2015 tax year, compared to the other components. Stamp Duty Reserve Tax has consistently been the lowest estimate across the time series.

The estimate for the Landfill Tax gap has been generally increasing to 2018 to 2019, reaching a peak of 29.1% in that year, followed by a reduction in subsequent years.

The estimate for the Stamp Duty Land Tax gap has a notable decline from 3.3% in 2011 to 2012 to 1.4% in 2013 to 2014, although has remained relatively stable at around 2% since 2015 to 2016.

The estimate for the Stamp Duty Reserve Tax gap has been stable across the time series at around 1.0%.

The estimate for the Petroleum Revenue Tax gap was stable around 2.0% until it was zero rated in 2015 to 2016.

The estimate for the ‘other taxes, levies and duties’ gap has gradually declined from 2005 to 2006 to 2021 to 2022.

Figure 6.2 Other duty gap as a percentage of total theoretical tax liabilities

Notes for Figure 6.2

1. The full data series can be seen in the online tables.

Stamp Duty Land Tax

Main findings

The Stamp Duty Land Tax gap is based on an experimental methodology using receipts, avoidance, and reliefs data.

To evaluate the uncertainty of our Stamp Duty Land Tax gap, we assign an uncertainty rating for each component, ranging from ‘very low’ to ‘very high’. The Stamp Duty Land Tax gap estimate has ‘medium’ uncertainty.

Figure 6.3 shows the Stamp Duty Land Tax gap time-series in absolute terms and relative to theoretical Stamp Duty Land Tax liability.

The Stamp Duty Land Tax gap is 1.7% of the theoretical Stamp Duty Land Tax liability, or £250 million in absolute terms, in the 2021 to 2022 tax year.

There has been a reduction in the Stamp Duty Land Tax gap between the tax years 2005 to 2006 and 2021 to 2022 from 3.2% to 1.7% of theoretical liabilities.

The Stamp Duty Land Tax gap was stable around 3.3% between 2005 to 2006 and 2011 to 2012. The fall in the Stamp Duty Land Tax gap from 2012 to 2013 is mainly due to a change in methodology.

Figure 6.3: Stamp Duty Land Tax gap by value and as a percentage of theoretical tax liabilities, 2005 to 2006 up to 2021 to 2022

Notes for Figure 6.3

1. The full data series can be seen in the online tables.
2. Figures are rounded to the nearest £25 million.
3. Percentage figures are rounded to the nearest 0.1%.

Figure 6.4 shows the Stamp Duty Land Tax gap, tax liability, and the theoretical liability, which is the sum of the tax gap and tax liability, since 2017 to 2018.

There is a notable decrease in the net tax gap from £250 million in 2019 to 2020 to £175 million in 2020 to 2021 largely due to a fall in Stamp Duty land Tax receipts and reliefs claimed, followed by an increase in net gap and liability in 2021 to 2022.

Figure 6.4: Stamp Duty Land Tax gap, tax liability and theoretical tax liability (£ million), since 2017 to 2018

Year	Net tax gap	Liability	Total theoretical tax liability
2017-18	200	12,900	13,100
2018-19	200	11,900	12,200
2019-20	250	11,600	11,800
2020-21	175	8,700	8,900
2021-22	250	14,100	14,300

Notes for Figure 6.4

1. The full data series can be seen in the online tables.
2. Figures for the tax gap are rounded to the nearest £25 million while the liability is rounded to the nearest £100 million.
3. Liability refers to the actual amount expected to be received by HMRC based on taxpayer declarations and HMRC’s compliance activity.

Revisions

Figure 6.5 shows the revisions to the Stamp Duty Land Tax gap since the publication of the ‘Measuring tax gaps 2022 edition’.

Generally, the Stamp Duty Land Tax gap for the time series is revised upwards in recent years due to the inclusion of additional Stamp Duty Land Tax avoidance data within the estimate.

Figure 6.5: Revisions to Stamp Duty Land Tax duty gap since the ‘Measuring tax gaps 2022 edition’

Notes for Figure 6.5

1. The full data series can be seen in the online tables.
2. MTG stands for ‘Measuring tax gaps’.

Stamp Duty Reserve Tax

Main findings

The Stamp Duty Reserve Tax gap is based on an experimental methodology using receipts data.

To evaluate the uncertainty of our Stamp Duty Reserve Tax duty gap, we assign an uncertainty rating for each component, ranging from ‘very low’ to ‘very high’. Stamp Duty Reserve Tax duty gap estimate has ‘very high’ uncertainty.

Figure 6.6 shows the Stamp Duty Reserve Tax gap time-series in absolute terms and relative to theoretical Stamp Duty Reserve Tax liability.

The Stamp Duty Reserve Tax duty gap is 1.0% of theoretical Stamp Duty Reserve Tax liability, or £40 million in absolute terms, in the 2021 to 2022 tax year.

The Stamp Duty Reserve Tax gap has remained broadly stable across the time series between the tax years 2005 to 2006 and 2021 to 2022 at 1.0% of total theoretical liabilities.

Figure 6.6: Stamp Duty Reserve Tax gap by value and as a percentage of theoretical tax liability, 2005 to 2006 up to 2021 to 2022

Notes for Figure 6.6

1. The full data series can be seen in the online tables.
2. Figures are rounded to the nearest £10 million.
3. Percentage figures are rounded to the nearest 0.1%.

Figure 6.7 shows the Stamp Duty Reserve Tax gap, tax liability, and the theoretical liability, which is the sum of the tax gap and tax liability, since 2017 to 2018.

The net tax gap has remained stable at £40 million between the tax years 2017 to 2018 and 2021 to 2022 due to the assumption that the tax gap is approximately 1% of Stamp Duty Reserve Tax liability. Stamp Duty Reserve Tax liability increased from £3.7 billion in 2020 to 2021 to £4.4 billion in 2021 to 2022.

Figure 6.7: Stamp Duty Reserve Tax gap, tax liability and theoretical tax liability (£ million), since 2017 to 2018

Year	Net tax gap	Liability	Total theoretical tax liability
2017-18	40	3,500	3,600
2018-19	40	3,600	3,700
2019-20	40	3,600	3,700
2020-21	40	3,700	3,700
2021-22	40	4,400	4,400

Notes for Figure 6.7

1. The full data series can be seen in the online tables.
2. Figures for the tax gap are rounded to the nearest £10 million while the liability is rounded to the nearest £100 million.
3. Liability refers to the actual amount expected to be received by HMRC based on taxpayer declarations and HMRC’s compliance activity.

Revisions

There are no revisions to the methodology for the Stamp Duty Reserve Tax duty gap since the publication of the ‘Measuring tax gaps 2022 edition’

Inheritance Tax

Main findings

The Inheritance Tax gap is estimated using an established statistical method based on operational audit data, to estimate both tax payable at death and liabilities arising on transfers and charges on UK registered discretionary trusts. The Extreme Value methodology assumes that there is a small number of very high yielding compliance cases and a large number of low yielding cases.

To evaluate the uncertainty of the Inheritance Tax gap, we assign an uncertainty rating for each component, ranging from ‘very low’ to ‘very high’. The Inheritance Tax gap estimate has ‘medium’ uncertainty.

Figure 6.8 shows the Inheritance Tax gap time-series in absolute terms and as a percentage of theoretical Inheritance Tax liability.

The Inheritance Tax gap is 4.7% of the theoretical Inheritance Tax liability, or £0.3 billion in absolute terms, in 2021 to 2022.

The Inheritance Tax gap has increased over time from 3.0% in the 2005 to 2006 tax year to 4.7% in 2021 to 2022 tax year. It reached a peak of 8.3% in 2013 to 2014.

Figure 6.8: Inheritance Tax gap by value and as a percentage of theoretical tax liabilities, 2005 to 2006 up to 2021 to 2022

Notes for Figure 6.8

1. The full data series can be seen in the online tables.
2. Figures are rounded to the nearest £0.1 billion.
3. Percentage figures are rounded to the nearest 0.1%.

Figure 6.9 shows the Inheritance Tax gap, tax liability, and the theoretical liability, which is the sum of the tax gap and tax liability, since 2017 to 2018.

The net Inheritance Tax gap has been broadly stable around £0.3 billion to £0.4 billion in the last 5 years. Inheritance Tax liability was relatively stable around £5 billion between 2017 to 2018 and 2020 to 2021, followed by an increase to £6.1 billion in 2021 to 2022. The total theoretical liability has been broadly stable around £5.7 billion between 2017 to 2018 and 2020 to 2021, followed by an increase to £6.4 billion 2021 to 2022.

Figure 6.9: Inheritance Tax gap, tax liability and theoretical tax liability (£ billion), since 2017 to 2018

Year	Net tax gap	Liability	Total theoretical tax liability
2017-18	0.4	5.2	5.6
2018-19	0.4	5.4	5.7
2019-20	0.3	5.1	5.4
2020-21	0.4	5.3	5.7
2021-22	0.3	6.1	6.4

Notes for Figure 6.9

1. The full data series can be seen in the online tables.
2. Figures are rounded to the nearest £0.1 billion.
3. Liability refers to the actual amount expected to be received by HMRC based on taxpayer declarations and HMRC’s compliance activity.

Revisions

Figure 6.10 shows the revisions to the Inheritance Tax gap since the publication of the ‘Measuring tax gaps 2022 edition’.

Estimates have been updated based on the most recent compliance data in each year of estimation. This has led to revisions across the series.

Figure 6.10: Revisions to Inheritance Tax gap since the ‘Measuring tax gaps 2022 edition’

Notes for Figure 6.10

1. The full data series can be seen in the online tables.
2. MTG stands for ‘Measuring tax gaps’.

Petroleum Revenue Tax

Main findings

The Petroleum Revenue Tax gap is not calculated from 2015 to 2016 as it has been zero rated from 1 January 2016.

The full data series can be seen in the online tables.

An illustrative indicator of the tax gap from Petroleum Revenue Tax for previous years was produced using the expert opinion of Petroleum Revenue Tax specialists. Given the narrowly defined base of the tax (limited to oil-producing fields developed before April 1993) and the small number of businesses involved, a range of between 1% and 3% of theoretical tax liabilities was used to calculate an illustrative tax gap. This produced an estimate tax gap of less than £10 million in tax year 2014 to 2015.

Landfill Tax

Main findings

The Landfill Tax gap is based on an experimental methodology using receipts, unauthorised waste sites and cash collected compliance data.

To evaluate the uncertainty of our Landfill Tax gap, we assign an uncertainty rating for each component, ranging from ‘very low’ to ‘very high’. The Landfill Tax gap estimate has ‘high’ uncertainty’.

Figure 6.11 shows the Landfill Tax gap time-series in absolute terms and relative to theoretical Landfill Tax liabilities.

The Landfill Tax gap is 18.4% of the theoretical Landfill Tax liability, or £150 million in absolute terms, in the 2021 to 2022 tax year.

There has been an increase in the Landfill Tax gap from 3.3% in the 2005 to 2006 to 18.4% in the 2021 to 2022 tax year.

There is a notable spike in the Landfill Tax gap in 2018 to 2019 due to the introduction of unauthorised waste sites within the scope of Landfill Tax legislation.

Figure 6.11: Landfill Tax gap by value and as a percentage of theoretical tax liability, 2005 to 2006 up to 2021 to 2022

Notes for Figure 6.11

1. The full data series can be seen in the online tables.
2. Figures are rounded to the nearest £25 million. Percentage figures are rounded to the nearest 0.1%.

Figure 6.12 shows the Landfill Tax gap, tax liability, and the theoretical liability, which is the sum of the tax gap and tax liability, since 2017 to 2018.

The net tax gap more than doubled in 2018 to 2019 from £125 million to £275 million due to the introduction of unauthorised waste sites within the scope of Landfill Tax legislation.

Figure 6.12: Landfill Tax gap, tax liability and theoretical tax liability (£ million), since 2017 to 2018

Year	Net tax gap	Liability	Total theoretical tax liability
2017-18	125	800	900
2018-19	275	700	1,000
2019-20	200	600	800
2020-21	125	600	700
2021-22	150	700	800

Notes for Figure 6.12

1. The full data series can be seen in the online tables.
2. Figures for the tax gap are rounded to the nearest £25 million while the liability is rounded to the nearest £100 million.
3. Liability refers to the actual amount expected to be received by HMRC based on taxpayer declarations and HMRC’s compliance activity.

Revisions

Figure 6.13 shows the revisions to the Landfill Tax gap since the publication of the ‘Measuring tax gaps 2022 edition’.

Generally, the Landfill Tax gap for the time series has small revisions in recent years due to updated unauthorised waste sites data from the Environment Agency.

Small corrections have also been made across the series of estimates following updates to data on diversion of waste away from landfill to incineration, which has a slight impact on the tax gap for earlier tax years.

Figure 6.13: Revisions to Landfill Tax gap since the ‘Measuring tax gaps 2022 edition’

Notes for Figure 6.13

1. The full data series can be seen in the online tables.
2. MTG stands for ‘Measuring tax gaps’.

Other taxes, levies and duties

Main findings

The ‘other taxes, levies and duties’ gap captures the duty gap of other taxes, levies and duties that do not currently have standalone models in the ‘Measuring tax gaps’ publication; namely Aggregates Levy, Air Passenger Duty, Climate Change Levy, Custom Duty, Digital Services Tax, Insurance Premium Tax and Soft Drinks Industry Levy.

Limitations in data or methods available means it is difficult to estimate these components individually, which is why an aggregated estimate is produced under ‘other taxes, levies and duties’.

The ‘other taxes, levies and duties’ gap is based on an experimental method, whereby a proxy indicator for the scale of revenue losses across ‘other taxes, levies and duties’ has been produced by estimating the weighted average percentage of tax gaps of the overall tax gap each year and multiplying this by theoretical tax liabilities.

The average percentage revenue losses should not be considered estimates of the true percentage loss across Aggregates Levy, Air Passenger Duty, Climate Change Levy, Custom Duty, Digital Services Tax, Insurance Premium Tax and Soft Drinks Industry Levy, as this is unknown. Many of these taxes are very different from one another in nature and are, therefore, subject to different rules. The true percentage duty gaps are therefore likely to vary across the taxes.

To evaluate the uncertainty of our ‘other taxes, levies and duties’ gap, we assign an uncertainty rating for each component, ranging from ‘very low’ to ‘very high’. ‘Other taxes, levies and duties’ gap estimate has ‘very high’ uncertainty.

Figure 6.14 shows the ‘other taxes, levies and duties’ gap time-series in absolute terms and relative to ‘other taxes, levies and duties’ total theoretical liabilities.

The other taxes, levies and duties gap is 4.8% of the theoretical ‘other taxes, levies and duties’ liability, or £0.8 billion in absolute terms, in the 2021 to 2022 tax year.

There has been a reduction in the ‘other taxes, levies and duties’ gap from 7.5% in 2005 to 2006 to 4.8% in 2021 to 2022.

The ‘other taxes, levies and duties’ gap varies across the time series due to sensitivities in the overall tax gap used as part of the weighted average in the methodology.

Figure 6.14: Other taxes, levies and duties gap by value and as a percentage of theoretical tax liabilities, 2005 to 2006 up to 2021 to 2022

Notes for Figure 6.14

1. The full data series can be seen in the online tables.
2. Figures are rounded to the nearest £0.1 billion.
3. Percentage figures are rounded to the nearest 0.1%.

Figure 6.15 shows the ‘other taxes, levies and duties’ gap, tax liability, and the theoretical liability, which is the sum of the tax gap and tax liability, since 2017 to 2018.

The net tax gap has broadly been stable around £0.8 to £0.9 billion since 2017 to 2018, however there is a fall to £0.6 billion in 2020 to 2021.

Figure 6.15: ‘Other taxes, levies and duties’ gap, tax liability and theoretical tax liability (£ billion), since 2017 to 2018

Year	Net tax gap	Liability	Total theoretical tax liability
2017-18	0.8	14.7	15.4
2018-19	0.8	15.7	16.5
2019-20	0.9	16.1	17.0
2020-21	0.6	12.3	12.9
2021-22	0.8	15.5	16.3

Notes for Figure 6.15

1. The full data series can be seen in the online tables.
2. Figures are rounded to the nearest £0.1 billion.
3. Liability refers to the actual amount expected to be received by HMRC based on taxpayer declarations and HMRC’s compliance activity.

Revisions

Figure 6.16 shows the revisions to the ‘other taxes, levies and duties’ gap since the publication of the ‘Measuring tax gaps 2022 edition’.

Generally, the other taxes, levies and duties gap has small revisions across the time series due to changes within the overall tax gap that form a part of the weighted average used within the methodology.

Figure 6.16: Revisions to other taxes, levies and duties gap since the ‘Measuring tax gaps 2022 edition’

Notes for Figure 6.16

1. The full data series can be seen in the online tables.
2. MTG stands for ‘Measuring tax gaps’.