SMEs owe more as tax gap falls

THE UK's TAX GAP has fallen £4bn to £35bn, according to the latest estimates from HM Revenue & customs.

The gap between what HMRC should theoretically collect in taxes compared tot the actual figure was £35bn for 2009/2010, representing a 7.9% gap.

Previously the figure was £39bn, a gap of 8.1% for 2008/2009. the decrease is mainly due to the reduction in the VAT gap over the period, when the standard rate of VAT fell to 15% from 17.5%.

Inaccurate PAYE returns from SMEs climbed to £900m from £600m over the period.

The gap increased for income tax, NI and CGT to £1.5bn, from £1.4bn.

Around half of the tax gap is attributed to SMEs, with a quarter from large businesses. Indviduals represent 11% while criminals 17%.

Exchequer secretary David Gauke said: "Although these numbers show continued progress by HMRC in reducing the tax gap, there is no room for complacency. Just in the last few weeks we have challenged offshore tax evaders, closed tax avoidance loopholes and created a new HMRC unit to ensure that the wealthier members of society pay their way."

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. The tax gap has reduced from 8.5% of total liabilities in 2004/05 to 7.9% in 2009/10 and we have almost doubled compliance revenues since 2005 to £14bn.

"HMRC staff have worked very hard to deliver these figures and we are going to do everything we can to achieve even more".