HMRC’s failure to close the small business tax gap costs £15bn/year
Over the last seventeen years most of the tax gap fell by two-thirds – a remarkable achievement. But a deep dive into HMRC’s new tax gap statistics shows HMRC has lost control of small business tax. About a third of corporation tax due from the sector is not being paid. The small business tax gap rose dramatically during the pandemic, and didn’t decline afterwards.
If HMRC had closed the small business tax gap as effectively as it closed other tax gaps, HMRC would collect £15bn more tax revenue each year.