AAT responds to latest tax gap figures

HMRC has published its latest tax gap estimates for 2019/20, which estimates the gap at around £35 billion: 5.3% of total tax liabilities.

The tax gap is the difference between the amount of tax that should be paid to HMRC in theory and what is actually paid. It provides a tool for understanding the size and nature of non-compliance and insight into which strategies are most effective at reducing the gap, as well as creating greater transparency in the tax system.

The latest tax gap is a slight increase on the previous gap of 5% in 2018/19, marking the first increase since 2013/14. Income Tax, National Insurance contributions and Capital Gains Tax make up the largest component of the gap, followed closely by VAT.

Responding to the announcement, Adam Harper, Director of Professional Standards and Policy at AAT, said: "AAT members help to ensure hundreds of thousands of clients pay the right amount of tax at the right time every year, playing an important role in keeping the tax gap as low as possible. We are naturally pleased that the latest official statistics released today indicate the tax gap remains comparatively low although note the small percentage increase on the previous year and very much hope this is not the beginning of an unwanted trend.

"There are many ways in which the tax gap could be further reduced, but a notable one would be to adopt AAT’s longstanding recommendation to ensure anyone offering paid for tax and accountancy services is a member of a professional body. This would help combat some of the unnecessary errors, evasion and egregious avoidance that remains unchecked when facilitated by the third of the tax and accountancy sector that remains unregulated."

AAT has recently published a new guide for consumers, What you should know before appointing an accountant, which provides advice on how to look after your financial interests and find an accountant who is a member of a relevant professional body.

More information about AAT’s campaign on this subject is available on AAT’s Accountable campaign page.