The UK tax gap fell in 2014 to 2015 to its lowest-ever level of 6.5% according to new HMRC statistics. The UK’s tax gap, the difference between the amount of tax due and the amount collected, is one of the lowest in the world (the tax gap is 34% in Italy, 23% in Mexico and 16.3% in the USA). HMRC’s Measuring Tax Gaps 2016 and methodological annex documents are published here.

HMRC has indicated that this reduction (from a high of 8.3% in 2005/2006) highlights the positive impact that digital transformation is having in making it easier for people to pay the right amount of tax. In particular, the introduction of Real Time Information for the Pay As You Earn (PAYE) system has led to more accurate recording of information on payroll taxes, and the shift to VAT online has helped bring the VAT gap in 2014-15 to its lowest level of 10.3% (£12.7 billion).

The 2013 study by the National Audit Office (NAO) on Gift Aid and reliefs on donations suggested that the amount of Gift Aid claimed ineligibly was £55m, approximately 5% of the overall claim at the time. These concerns about the Tax Gap have resulted in a review of the Gift Aid declaration and efforts to ensure that donors are aware of their responsibilities to ensure they have paid sufficient tax to cover their Gift Aid claim. While it is very important that the Tax Gap is reduced and ineligible Gift Aid claims are prevented, it also remains important that any associated regulations are proportionate and do not restrict the vast majority of law abiding charities.