23 June 2022
If you are covering the HMRC’s publication about tax gaps, which is the difference between the amount of tax that should in theory be paid to HMRC, and what is actually paid, please see the following comment from Rachael Griffin, tax and financial planning expert at Quilter:
"While HMRC should be applauded for ensuring that 94.9% of all taxes were collected successfully there are still clear issues with the system that remain unaddressed. Simple errors accounted for nearly £3bn of the tax gap equating to 9% of the total. In addition, the biggest contributor to the tax gap was ‘failure to take reasonable care’ making up a huge £6.1bn of the tax gap equating to 19% of the total. Both reasons for failing to pay tax point to a complicated system that people clearly struggle with and is costing the government billions each year.
"The stability of the tax gap over the last few years also points to there needing to be a radical change if we are going to ensure that the public coffers are refilled particularly after they have been so heavily drained due to Covid. The tax gap for the 2010/11 tax year was 6.7% so in a decade we have only improved by a paltry 1.6%. There are clearly holes in our tax system the government have so far not found the means to plug.
"The government should really be ploughing their efforts into reducing the tax gap rather than raising taxes themselves. For example, if the current 5% tax gap could be reduced by around 2 percentage points then the rise in national insurance contributions could be counteracted as this would raise roughly £13bn. The IFS calculates that NICs bills in 2022–23 are forecast to raise £10.9 billion in revenue, with the revenue from the increase in NICs rates from April forecast to raise substantially more (£17.2 billion) than the reduction in revenue from the increases in thresholds from July (£6.3 billion).
"New schemes such as Making Tax Digital should help to streamline the process and make sure that people pay the tax they owe and avoid unintended errors. However there are ever-growing challenges, not least with the growing popularity of crypto assets, where HMRC’s ability to gather information is likely still at an early stage. Making sure all members of society pay tax is an essential part of our system. Fixing the nations taxation system is going to become increasingly important in the wake of the pandemic and during the current tough financial times we are living through. For those worried that they are going to make mistakes when filing their tax returns, seeking professional financial advice can help alleviate the worry and make sure that you are paying exactly the amount they owe."
