HMRC has published data analysing the tax gap for 2022/23. The tax gap is the difference between what HMRC expects the total tax take for 2022/23 to be, and the actual tax received.
Headline figures show that in percentage terms, the tax gap has fallen slightly as a percentage of tax liabilities. However, it is worth noting that it has remained at around the 5% level for the past six years. In real terms, the tax gap has risen compared to 2021/22, from £38.1bn to £39.8bn.
Tax gap by type of tax
The tax gap relating to corporation tax has increased significantly from £10.8bn for 2021/22 to £13.7bn for 2022/23. However, compared to the theoretical corporation tax take, the percentage remains relatively static. The increases in the corporation tax gap in recent years are primarily due to increases in the corporation tax gap for small businesses.
The VAT gap as a percentage of the total tax gap has reduced from 13.7% for 2005/06 to 4.9% for 2022/23. In cash terms, it stands at £8.1bn for 2022/23.
Tax gap by customer group
The tax gap attributed to small businesses continues to rise, and now stands at £24.1bn. This equates to 60% of the overall tax gap for 2022/23, up from 44% of the overall tax gap for 2018/19.
The tax gap attributed to large businesses has remained constant year-on-year at £4.3bn. In percentage terms, it has fallen from 15% of the overall tax gap in 2018/19 to 11% in 2022/23.
Tax gap by behaviour
What ICAEW views to be criminal behaviour is subdivided by HMRC into evasion, criminal attacks, and the hidden economy. These have been combined as ‘criminal behaviour’ in the table below and total £11.2bn for 2022/23, equivalent to 28% of the tax gap. This is a drop in percentage terms from 30% in the previous year.
Non-payment has increased year-on-year from £3.3bn for 2021/22 to £5.2bn for 2022/23 and now accounts for 13% of the tax gap. This likely reflects the changing economic circumstances.
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