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The latest tax gap figures have been released by HM Revenue & Customs, showing record highs and lows.

The tax gap is the difference between the amount of tax that should (in theory) be paid to HMRC, and what is actually paid.

Recent figures show the gap is at a record high in terms of cash, however, it also shows record lows for the tax that should be collected.

Interestingly, HMRC stated that digital record keeping and quarterly digital reporting for VAT (the first stage of Making Tax Digital) would ‘reduce the amount of tax lost to avoidable errors’.

However, the amount of tax lost to both error and ‘failure to take reasonable care’ has increased significantly since then – though the overall ‘VAT gap’ has fallen since MTD began.

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Commenting on the results, John Barnett, Chair of CIOT’s Technical Policy and Oversight Committee, said, “There is something for everyone in these figures. Critics of HMRC can point to a record amount – nearly £40 billion – not being collected, but HMRC can legitimately point out that they are bringing in a record share of the expected tax take. That both these things can be true simultaneously tells us more about current tax levels than anything else.

“There are some alarming revisions in these numbers, especially with respect to small business non-compliance. Rising numbers of business insolvencies (and general inability to pay) are also having an impact on tax collection.

“These figures show there is plenty of work for HMRC to do in a range of areas to reduce the tax gap. However, we should not lose sight of the fact that their record, collecting more than 95 per cent of tax due, compares well internationally.”

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