HMRC cuts lost tax gap by ten per cent

Wednesday, 21 September 2011 05:12

The amount of tax that the Inland Revenue has failed to collect fell by £4 billion in 2009-10, HM Revenue and Customs (HMRC) said.

£35 billion of tax revenue calculated as due was not collected, down from £39 billion in 2008-09, its figures show.

This figure represents 7.9 per cent of all tax due and is down from 8.1 per cent in the previous year and is the lowest since 2004-05.

Exchequer secretary David Gauke said: "Although these numbers show continued progress by HMRC in reducing the tax gap, there is no room for complacency.”

HMRC produced the figures based on evidence collected during tax inspections.

VAT collection levels were the biggest single factor and the emergency reduction in the VAT rate introduced by the Labour government between December 2008 and the 21st December 2009 was a key reason.

£11.4 billion of VAT was not collected in 2009-10, 13.8 per cent of the total due.

£5.8 billion of income tax due was not collected because of inaccurate self-assessment tax returns, according to HMRC estimates. The tax authorities lost a further £1.8 billion because of “moonlighting”, where people who work a second job don’t declare their income.

Businesses were also guilty of not paying taxes due, according to the report. Some £4.8 billion of corporation tax went uncollected.

HMRC were given £917 million in the 2010 spending review to address the gap in collecting taxes and this week Chief Secretary for the Treasury, Danny Alexander, said that 2,000 new tax inspectors are to be recruited.

HMRC is expected to use the funding to increase tax revenue by £7 billion a year by 2014-15.

Dave Hartnett, HMRC permanent secretary for tax, said: "The tax gap is the result of a wide range of behaviours and the challenges are constantly changing, but these figures show we are continuing to tackle non-compliance."

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