HMRC has been stepping up its actions against tax avoiders, and yet recent statistics have reduced the justification for the organisation’s attacks on contractors.
The gap between the amount of tax that should be paid and the amount that is actually collected has fallen. As a proportion of overall liabilities, the gap is down from 6.9 per cent in the previous tax year to 6.5 per cent.
Despite all the news stories about tax evasion, of the £35.95 billion that is missing, only £2.2 billion is due to tax avoidance. This figure is lower than that for tax evasion, which costs the Treasury £5.2 billion, and simple errors, which cost a further £3.2 billion.
Another contributor to the gap is individuals not taking enough care over their tax returns, which costs the Treasury £5.5 billion, representing 15 per cent of the gap. Errors by taxpayers are on the rise and contribute 9 per cent to the gap, costing the Treasury £1 billion more than tax avoidance does at 6 per cent of the gap.
The Chartered Institute of Taxation (CIOT) said: “[We are] concerned over the growth in unintentional non-compliance. We will continue to push for the more simplified and workable tax system.”
The CIOT believes that without such a system, innocent mistakes made during the preparation of tax calculations or when filling out tax returns will continue to be high.
The CIOT’s John Cullinane said: “A billion pounds more is lost in errors than in tax avoidance. If the tax authority needs more resources to directly help taxpayers to pay the correct sums, then we suggest … they should get it.”