The small business tax crisis: 40% of tax due isn't paid
The “tax gap” is the difference between the tax HMRC should collect and the tax it actually collects. Over the last nineteen years, most of the tax gap has fallen by two-thirds - a remarkable achievement. But a deep dive into HMRC’s new statistics shows it has lost control of small business tax: 40% of corporation tax due from small businesses is not being paid. The small business tax gap rose sharply during the pandemic - and hasn’t fallen since.
If HMRC had closed the small business tax gap as effectively as it closed other tax gaps, it would collect £15 billion more each year.
How I h of this is Collections outsourcing of small amounts? These are not collected and what us collected us eaten up by ‘charges’. Needtobe brought backin-house
Is some of this tax gap related to tax demands from HMRC that have been appealed because HMRC have misintepreted the law and demanding tax that is not due. There are 1000s of cases where HMRC are trying to claim that the accountants of small independent businesses were Managed Service Company Providers ignoring the overwhelming evidence to the contrary. Those cases relate to tax years ending 2018, 2019, 2020 and amount to around £200M based on calculations that HMRC have "determined" but know to be incorrect.