House of Commons Public Accounts Committee: Tackling the tax gap

The House of Commons Public Accounts Committee has published a report titled Tackling the tax gapThe report makes several recommendations relating to how the Government could address the current tax gap. The recommendations are as follows:

  • HMRC should state more clearly (for example in its Annual Report or tax gap press notice) that its tax gap figures are highly uncertain and subject to revision. It should report the known range and scale of uncertainty alongside its headline estimates of the tax gap and compliance yield for 2019–20 onwards. Where that is not possible, HMRC should explain the elements where it is too difficult to give the range and scale of uncertainty
  • HMRC should include analysis of the tax gaps for each industrial sector in its future publications of the tax gap. In its Treasury Minute response to this report, HMRC should also set out what the benefits and challenges are of doing a similar analysis about the tax gaps in the four nations of the UK.
  • Parliament needs to know when taxpayers do not follow the spirit of the rules, and how much tax revenue is lost as a result. In addition to the tax gap, HMRC should look at ways to measure and report the estimated scale of sophisticated tax planning that is legal but undesirable from a policy perspective by tax type and taxpayer group each year
  • HMRC should, alongside its Treasury Minute response, write to us separately explaining in detail how it will change its compliance approach in light of COVID-19.
  • HMRC should, as part of piloting future rounds of MTD, assess whether the administrative burden it is imposing on taxpayers is reasonable and affordable before proceeding with further national roll-outs.
  • HMRC should write to us within one month of this report explaining how it plans to balance its efforts to tackle the tax gap in small businesses with the support that those businesses will need to survive the impact of COVID-19.