Looking at tax gap figures published by HM Revenue and Customs spanning six years to 2014/15, RSM found that revenue lost via tax avoidance is at its lowest level ever in the UK, having dropped by more than half.
The firm’s findings come as the tax authority revealed last October that the gap between the amount of tax HMRC expected to collect in the last financial year and what it actually raised has fallen to its lowest ever level, and is now one of the smallest in the world (table above).
Indeed, RSM’s table above shows that over the last six year, revenue lost via tax avoidance plunged from £5bn in 2009/10 to £2bn to 2014/15.
However, over the same period the amount of revenue lost via tax evasion and the hidden economy rose, reaching £11.9bn in 2014/15.
This is despite HMRC announcing last year that it plans to increase the penalties on anyone who has not paid outstanding taxes from offshore investments ahead of the start of a new data sharing agreement with the crown dependencies and territories in October.
“HMRC has not exactly been idle in trying to clamp down on tax evasion. Indeed, a new, tougher penalty regime is intended to make it more attractive for evaders to come clean. However, this may simply increase the resolve of evaders not to be caught,” said George Bull, senior tax partner at RSM.
Tax avoidance plunges
Bull predicts that UK tax revenue lost via tax avoidance will continue to drop amid recent measures introduced by HMRC including hefty fines for financial advisers and other financial services professionals found guilty of helping their clients dodge tax.
“The graph shows very clearly that tax avoidance is at its lowest level. That’s hardly surprising when one considers the huge amount of resources devoted to tackling this.
“With further anti-avoidance measures having been introduced in 2015/16 and 2016/17, and with more to follow in the next tax year, we confidently expect to see the level of tax avoidance continue to drop in future tax gap estimates,” he explained.
