HMRC update – Measuring Tax Gaps 2023

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Measuring Tax Gaps 2023 report, NAO’s MTD report.

Measuring Tax Gaps 2023 report published

The Measuring Tax Gaps report is HMRC’s annual publication, covering tax gap estimates for all the taxes, levies and duties HMRC administers. This includes estimates of the overall tax gap, and tax gap split by tax type, customer group and behaviour between 2005-06 to 2021-22.

In the latest report, the UK tax gap in 2021 to 2022 is estimated to be 4.8% of total theoretical tax liabilities, or £35.8 billion in absolute terms – which means HMRC collected 95.2% of all tax due. The tax gap has remained low and stable since 2017-18.

Further findings for the 2021 to 2022 tax gap publication show:

  • at 56% (£20.2 billion), small businesses represent the largest proportion of the tax gap by customer group, followed by criminals, large businesses and mid-sized businesses at 11% each (£4.1 billion, £3.9 billion and £3.8 billion respectively)
  • individuals account for around 6% (£2.1 billion) of the overall tax gap and, at 5% (£1.7 billion), wealthy individuals have the smallest tax gap by customer group
  • Income Tax, National Insurance contributions and Capital Gains Tax makes up 35% (£12.7 billion) of the total tax gap when measured by type of tax
  • Corporation Tax is now estimated as the second-largest component of the tax gap by tax type at 30% (£10.6 billion). New data has increased understanding of CT tax gap, resulting in revised forecasts
  • the VAT gap continues a long-term downward trend falling from 14% (£11.9 billion) in 2005 to 2006 to 5.4% (£7.6 billion)
  • failure to take reasonable care (30%), error (15%), evasion (13%), legal interpretation (12%) criminal attacks (11%) and non-payment (9%) are among the main behavioural reasons for the tax gap.

You can read the full Measuring Tax Gaps 2023 publication on GOV.UK. 

Deadline for voluntary National Insurance contributions extended to 5 April 2025

Eligible customers now have until 5 April 2025 to fill gaps in their National Insurance record for tax years from April 2006 – to possibly increase their State Pension.

Men born after 5 April 1951 or women born after 5 April 1953 have more time to check their records, decide whether to pay voluntary contributions to make up for gaps in their National Insurance record and be able to afford to do so.

Find out more information about the deadline for voluntary National Insurance contributions extended to 5 April 2025 on GOV.UK.

Publication of National Audit Office report on Making Tax Digital

The National Audit Office has published their report on Making Tax Digital (MTD).

We have worked closely with the NAO as they have developed their report and welcome the scrutiny and perspective that it offers on the programme, including recognition of our progress in digitalising the tax system, and its confirmation that our plans can bring a step-change in its efficiency and effectiveness.

We will carefully consider the NAO’s recommendations, several of which reflect work already underway and continue to work closely with stakeholders to enable us to make the best preparations for MTD for Income Tax Self Assessment.

OCED Pillar 2 framework legislation changes

The government introduced legislation in the Finance Bill 2022/23, to implement the globally agreed G20-OECD Pillar 2 framework in the UK.  

The legislation will introduce:

  • a multinational top-up tax which will require large UK headquartered multinational groups to pay a top-up tax where their foreign operations have an effective tax rate of less than 15%  
  • a domestic top-up tax which will require large groups, including those operating exclusively in the UK, to pay a top-up tax where their UK operations have an effective tax rate of less than 15%.  

These changes will apply to large groups with over 750 million euros global revenues and will take effect in relation to accounting periods beginning on or after 31 December 2023. 

As part of HMRC’s commitment to support customers during change, it has contacted businesses likely to be in scope of OECD Pillar 2. It has provided key information about the new international tax framework and where they can find further guidance. 

HMRC will be providing regular updates on Pillar 2 developments to support business with the upcoming change. It is making good progress in implementing changes as part of the G20/OECD agreement to reform the international tax framework, ahead of the first commencement date of 31 December 2023.

Shared on behalf of other government departments

Apply for higher level of support for energy bills by 25 July 2023

The Department for Energy Security and Net Zero is encouraging those organisations who require a higher level of support, including Energy and Trade Intensive Industries and from the Energy Bills Discount Scheme (EBDS), to take action by 25 July 2023.

The Energy Bills Discount Scheme (EBDS) commenced on 1 April and will run until 31 March 2024. Under the scheme, the government will provide a baseline discount to support energy bills for eligible non-domestic customers in Great Britain and Northern Ireland.

As with the original Energy Bill Relief Scheme (EBRS), suppliers will automatically apply reductions to the bills of all eligible non-domestic customers.

Businesses can apply for the Energy Bills Discount Scheme support for Eligible Energy and Trade Intensive Industries and view the complete list of eligible sectors on GOV.UK.

Please share this information with your networks to make them aware of any action they might need to take to secure their energy bills support.

AAT Comment offers news and opinion on the world of business and finance from the Association of Accounting Technicians.

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